An electric utility is considering two alternatives for satisfying state regulations regarding pollution control for one of its generating stations. This particular station is located at the outskirts of a major U.S. city and a short distance from a large city in a neighboring country. The station is currently producing excess VOCs and oxides of

nitrogen. Two plans have been proposed for satisfying the regulators. Plan A involves replacing the burners and switching from fuel oil to natural gas. The cost of the option will be $300,000 initially and an extra $900,000 per year in fuel costs. Plan B involves going to the foreign city and running gas lines to many of the “backyard”

brick-making sites that now use wood, tires, and other combustible waste materials for fi ring the bricks. The idea behind plan B is that by reducing the particulate pollution responsible for smog  in the neighboring city, there would be greater benefi t to U.S. citizens than would be achieved through plan A. The initial cost of plan B will be

$1.2 million for installation of the lines. Additionally,  the electric company would subsidize the cost of gas for the brick makers to the extent  of $200,000 per year. Extra air monitoring associated  with this plan will cost an additional  $150,000 per year. For a 10-year project period  and no salvage value for either plan, which one

should be selected on the basis of an annual   worth analysis at a real interest rate of 7% per year and an inflation rate of 4% per year?