Clear Water Company has a down-hole well auger that was purchased 3 years ago for $30,000. O&M costs are $10,500 per year. Alternative A is to keep the existing auger, which has a current market value of $10,500. It will have a $0 salvage value after 7 more years. Alternative B is to buy a new auger that will cost $45,000 and will have a $16,000 salvage value after 7 years. O&M costs are $5,500 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 $61,000, and the trade-in allowance for the existing auger is $14,500. 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 $8,000. End-of-year O&M cost would be $4,500. MARR is 15%, and the planning horizon is 7 years.

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

EOY	Alt A	Alt B	Alt C	Alt D
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Show the EUAC values used to make your decision:

Alternative A	___ $
Alternative B	___ $
Alternative C	___ $
Alternative D	___ $

Clearly show the cash flow profile for each alternative using an opportunity cost approach (outsiders viewpoint approach).

EOY

Alt A

Alt B

Alt C

Alt D

0

1

2

3

4

5

6

7

Show the EUAC values used to make your decision:

Alternative A	$
Alternative B	$
Alternative C	$
Alternative D	$