Power Plant Generating Electricity One Part Industrial Plant Two Alternative Power Plants Q29141250

A power plant for generating electricity is one part of aindustrial plant. Two alternative power plants with necessarycapacity have been suggested. One uses a boiler and steam turbinewhile the other uses a gas turbine.

Boiler and steam turbineGas turbineInitial investiment$600000$400000Fuel costs per year$16000$24000Maintenance per year$12000$15000Insurance per year$18000$12000service life20 years10 yearsSalvage value at end of life$0$0

All other costs are the same for either type of power plant. A12% return is required on any investiment. If one these plants mustbe accepted, which one should be recommended?