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DelRay Foods must purchase a new gumdrop machine. Two machines are available. Machine 7745 has a first cost of $7, 200, an estimated life of
DelRay Foods must purchase a new gumdrop machine. Two machines are available. Machine 7745 has a first cost of $7, 200, 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 first cost of $8, 000, a life of 10 years, and no salvage value. Its annual operating costs will be $ 260 regardless of the number of gumdrops produced. MARR is 6%/year, and 30 million gumdrops ware produced year. a. What is the annual worth of each alternative? Machine 7745 AW = $ Machine A37Y AW = $ b. What is the decision rule for determining the preferred machine based on annual worth ranking? c. Which machine should be recommended? d. Now determine which machine should be recommended based on an incremental annual worth analysis
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