A construction company is considering two different cranes for building a new apartment development. Crane A costs $290,000, has a four-year life, and requires $85,000 in pre-tax annual operating costs. Crane B costs $405,000, has a six-year life, and requires $75,000 in pre-tax annual operating costs. Both cranes are to be depreciated straight-line to zero over their respective lives. There will be no salvage values. The tax rate is 34% and the appropriate discount rate is 11%. Which crane should be purchased? Evaluate under the following two conditions:

1. Whichever crane is chosen, it will not be replaced and will be used to complete the project during its life. In other word, the project and the crane have the same lives.

b. The company continues building new apartments and will always need a crane. When one wears out, it must be replaced. In other word, the life of the project (apartment construction) is longer than the life of the crane.