Your company is looking to purchase a mechanical device to help be more efficient and cut costs. You are tasked with comparing 2 options. For this problem, consider we live in a world with an annual interest rate of 10% compounded annually.

Option A: You can purchase device A that costs $50,000 when purchased. Maintenance will cost $2000 per year, and device A generates revenues of $7,000 per year for 5 years. Device As salvage value at year 5 is $10,000.

Option B: You can purchase device B that costs $40,000 when purchased. Maintenance will cost $1500 per year, and device A generates revenues of $4,000 per year for 5 years. Device As salvage value at year 5 is $7,000.

For both options, (1) draw the original cash flow diagram showing all amounts and , (2) draw a simplified cash flow diagram, (3) compare the two options and provide your recommendation for the most cost effective option. Option A: $24,836.85; Option B $26,176.59