What is the annual worth of each alternative

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Reference no: EM131324297

DelRay Foods must purchase a new gumdrop machine. Two machines are available. Machine 7745 has a first cost of $8,200, 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 $280 regardless of the number of gumdrops produced. MARR is 6%/year, and 30 million gumdrops ware produced each 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?

Reference no: EM131324297

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