Question: A project engineer was given the assignment to determine which model of a new excavator the company should purchase based on an interest rate of

A project engineer was given the assignment to determine which model of a new excavator the company should purchase based on an interest rate of 10 percent per year.

Model A - will cost $100,000 to purchase (year 0) and will generate $15,000 income each year for next 10 years (years 1-10)

Model B- will cost $150,000 to purchase (year 0) and will generate $20,000 income each year for next 10 years (years 1-10)

A) Draw the cash flow diagram for Model B

B) Based on net present value (time zero) of the income and expense, which model should the engineer recommend?

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