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Clear Water Company has a down-hole well auger that was purchased 3 years ago for $30,000. O&M costs are $10,000 per year. Alternative A is
Clear Water Company has a down-hole well auger that was purchased 3 years ago for $30,000. O\&M costs are $10,000 per year. Alternative A is to keep the existing auger, which has a current market value of $13,000. It will have a $0 salvage value after 7 more years. Alternative B is to buy a new auger that will cost $46,000 and will have a $14,000 salvage value after 7 years. O&M costs are $8,000 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 $3,750 per year. It costs $77,000, 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 $9,000. End-of-year O\&M cost would be $4,500. MARR is 15%, and the planning horizon is 7 years. Click here to access the TVM Factor Table Calculator Part a Clearly show the cash flow profile for each alternative using a cash flow approach (insider's viewpoint approach). Carry all interim calculations to 5 decimal places and then round your final answer to the nearest dollar. The tolerance is \pm 10
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