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D. What is the decision rule for determining the preferred machine based on annual worth ranking? c. Which machine should be recommended?

D. What is the decision rule for determining the preferred machine based on annual worth ranking? c. Which machine should be recommended?

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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DelRay Foods must purchase a new gumdrop machine. Two machines are available. Machine 7745 has a first cost of $ 1,400, 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 $ 200 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-$ Round your answer to the nearest whole dollar. Tolerance is +1. b. What is the decision rule for determining the preferred machine based on annual worth ranking? c. Which machine should be recommended?
Transcribed Image Text:DelRay Foods must purchase a new gumdrop machine. Two machines are available. Machine 7745 has a first cost of $ 1,400, 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 $ 200 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-$ Round your answer to the nearest whole dollar. Tolerance is +1. b. What is the decision rule for determining the preferred machine based on annual worth ranking? c. Which machine should be recommended?
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