24. DelRay Foods must purchase a new gumdrop machine. Two machines are available.

Machine 7745 has a fi rst cost of $10,000, an estimated life of 10 years, a salvage value of $1,000, and annual operating costs estimated at $0.01 per 1,000 gumdrops. Machine A37Y has a fi rst cost of $8,000, a life of 10 years, and no salvage value. Its annual operating costs will be $300 regardless of the number of gumdrops produced. MARR is 6 percent/year, and 30 million gumdrops are produced each year.

a. What is the present worth of each machine?

b. What is the decision rule for determining the preferred machine based on present worth ranking?

c. Which machine should be recommended?