1. A firm has decidffed to establish a manufacturing plant in Any City. There is a factory for sale for $850,000 that, with extensive remodeling, could be used. As an alternative, the company could buy vacant land for $85,000 and have a new plant constructed there. Either way, it will be 3 years before the company will be able to get a plant into production. The timing and cost of the various components for the factory are given in the following cash flow table.

Year	Construct New Plant	Remodel Available Factory
0	Buy land	$ 85,000	Purchase factory	$ 850,000
1	Design and initial Construction costs	200,000	Design and Remodeling Costs	250,000
2	Balance of Construction Costs	1,200,000	Additional Remodeling Costs	250,000
3	Setup of production Equipment	200,000	Setup of production Equipment	250,000

If interest is 8%, which alternative results in the lower equivalent cost when the firm begins

.production at the end of the third year?