Allen Construction purchased a crane 6 years ago for \($130,000.\) They need a crane of this capacity for the next 5 years. Normal operation costs \($35,000\) per year. The current crane will have no salvage value at the end of 5 more years. Allen can trade in the current crane for its market value of \($40,000\) toward the purchase of a new one, which costs \($150,000.\) The new crane will cost only \($8,000\) per year under normal operating conditions and will have a salvage value of \($55,000\) after 5 years. If MARR is 20 percent, determine which option is preferred.

a. Use the cash flow approach (insider’s viewpoint approach). 

b. Use the opportunity cost approach (outsider’s viewpoint approach).