Material X costs $100,000 initially but requires $10,000 in maintenance costs for each of the next 5 years. Material Z costs $150,000 initially but has no further maintenance costs. At an 18% interest rate, the present worth of Material X is $163,000 while Material Z has a present worth of $150,000, so Material Z should be selected based on the lower present worth.

1. A metallurgical engineer is considering two materials for use in a space vehicle. The costs are
shown below. Which should be selected on the basis of present worth comparison at an interest
rate of 18% per year? Draw the cash flow diagrams for Material X and Material Z.