A mechanical engineer has decided to introduce automated materials$-$handling equipment for a production line. He must choose between two alternatives: building the equipment or buying the equipment off the shelf. Each alternative has a different service life and a different set of costs.

Alternative $1$: build custom automated materials$-$handling equipment

First cost:

Labour:

Power:

Maintenance:

Taxes and Insurance.

Service life:

$$15,000$

$$3300$ per vear

$$400$ per year

$$2400$ per year

$$300$ per year

$10$ years

Alternative $2$: buy off$-$the$-$shelf standard automated materials$-$handling equipment

First cost:

$$25\mathrm{.}000$

Labour:

Power:

Maintenance:

Taxes and insurance:

Service life:

$$1450$ per year

$$600$ per year

$$3075$ per year

$$500$ per year

$15$ years

If the interest rate is $9\%,$ determine which alternative is better using both Present Worth and Annual Cash Flow Analvsis