A division of Raytheon owns a 5-year old turret lathe that has a non-tax book value of \($24,000.\) It has a current market value of \($18,000.\) The expected decline in market value is \($3,000\) per year from this point forward to a minimum of \($3,000.\) O&M costs are \($8,000\) per year. Additional capability is needed. If the old lathe is kept, that new capability will be contracted out for \($13,000,\) assumed payable at the end of each year. A new turret lathe has the increased capability to fulfill all needs, replacing the existing turret lathe and requiring no outside contracting. It can be purchased for \($65,000\) and will have an expected life of 8 years. Its market value is expected to be \($65,000(0.7t)\) at the end of year t. Annual O&M costs are expected to equal \($10,000.\) MARR is 15 percent, and the planning horizon is 8 years.

a. Clearly show the cash flow profile for each alternative using a cash flow approach (insider’s viewpoint approach). 

b. Using an EUAC and a cash flow approach (insider’s viewpoint approach), decide which is the more favorable alternative. 

c. Clearly show the cash flow profile for each alternative using an opportunity cost approach (outsider’s viewpoint approach). 

d. Using an EUAC comparison and an opportunity cost approach (outsider’s viewpoint approach), decide which is the more favorable alternative.