Preferred machine based on annual worth ranking

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Reference no: EM131511534

DelRay Foods must purchase a new gumdrop machine. Two machines are available. Machine 7745 has a first cost of $ 6,600 , 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 $ 120 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?

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.

Reference no: EM131511534

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