Clear Water Company has a down-hole well auger that was purchased 3 years ago for \($30,000.\) O&M costs are \($13,000\) per year. Alternative A is to keep the existing auger, which has a current market value of \($12,000.\) 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 on the open market 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 \($6,000.\) MARR is 15 percent, and the planning horizon is 7 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.