A General Contractor wishes to evaluate two alternatives shown in the table below for operating his excavation business. Costs are shown in the table below. The contractor expects to earn $2500/day for each day of excavation service. Itr = 25%, 5-yr property MACRS. MARRAT = 10%

Alt 1

Purchase New Excavator $250,000

Estimated life 6 years

Salvage Value $0

Annual Maintenance $2,400 1st year, increases by 10%/year

Daily Operating Expense $300 per day

Alt 2

Subcontract Services $2,000 per day