Draw the cash flow diagrams for each alternative.

Alt A:

Cost of equipment is $1,500,000

Financed for 5 years at 6% per year APR

Life is 5 years

Operation &Mantenaince Costs are $500/year

O&M Cost increase by $150/year each year of ownership

Salvage Value is $150,000

Alt B:

Cost of equipment is $2,250,000

Financed for 10 years at 6% per year APR

Life is 10 years

Operation & Maintenance Costs are $200/year

O&M Cost increase by $100/year each year of ownership

Salvage Value is $300,000