Splenda specializes in making S'mores cakes. The cost of making the S' mores is as mentioned in the table. Recently Splenda has been facing a lot of problems with the oven as some of its chocolate chips are not sticking to the cracker and hence they have to scrap them. This accounts for 10% of the S'mores actually made. A vendor feels that the installation of a new oven which has just been introduced in the market is the solution to this problem. He says that the installation of this oven with temperature sensors that would have an onetime cost of $90,000 in year 0 will completely reduce the loss due to the defective items. Splenda operates 40 hours a week for 48 weeks a year. It can sell a box of S'mores for $15. Assuming Splenda can sell all the cakes it makes which option would you recommend for a 10-year life to Splenda if the cost of capital for Splenda is 6%.

	Cost
Material Cost per box	$1.93
Labor cost (2 operators @ 15 per hour)	$30
Electricity ($/hr)	$1.20

Current set-up:

It takes 1 hour to make 32 S' mores

8 smores in a box

Maintenance of $3,000 is incurred per year and this increases by 250 every year

Number of boxes per hour is 4

New set up:

It takes 1 hour to make 32 S'mores

8 smores in a box

Maintenance of $1,800 is incurred per year. This increases by 2% every year

Number of boxes per hour is 4

Please only attempt if you are 100% sure about the answer. Show all step. Do not copy from chegg.

a. AEW of current?

b. AEW of New?

c. Which option to be selected?