ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Question
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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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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