A design team has narrowed its mechanical system options to the following two choices. Both meet the technical and performance requirements necessary for the project, making the final decision one of economics. Given the following data, which option would you recommend, and why? Discuss other possible factors that may force you to change your first choice?
Option 1: Initial purchase price: $200,000, Annual maintenance and operating cost: $25,000, Salvage value (after fifteen years): $25,000, Cost of money: 8 %.
Option 2: Initial purchase price $250,000, Annual maintenance and operating cost: $20,000, Salvage value (after fifteen years): $30,000, Cost of money 8 %.