Clear Water Company has a down-hole well auger that was purchased 3 years ago for \($30,000.\) It has been depreciated over the 3 years as MACRS-GDS 5-year property. It has an estimated remaining life of 7 years. O&M costs are \($13,000\) per year. Alternative A is to keep the existing auger. It has a current market value of \($12,000,\) and it will have a \($0\) salvage value after 7 more years. Alternative B is to buy a new auger that will cost \($54,000\) and will have a \($14,000\) salvage value after 7 years. O&M costs are \($6,000\) for the new auger. Clear Water can trade in the existing auger on the new one for \($15,000.\) Alternative C is to trade in the existing auger on a ‘‘treated auger’’ that requires vastly less O&M cost at only \($3,000\) per year. It costs \($68,000,\) and the trade-in allowance for the existing auger is \($17,000.\) The ‘‘treated auger’’ will have an \($18,000\) salvage value after 7 years. Alternative D is to sell the existing auger for its market value of \($12,000\) and to contract with a current competitor to use their equipment and services to perform the drilling that would normally be done with the existing auger. The competitor requires a beginning-of-year retainer payment of \($10,000.\) End-of-year O&M cost would be \($6,000.\) The after-tax MARR is 9 percent, the tax rate is 40 percent, and the planning horizon is 7 years.

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

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