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Margarita [4]
2 years ago
14

DelRay Foods must purchase a new gumdrop machine. Two machines are available. Machine 7745 has a first cost of $10,000, an estim

ated 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 $300 regardless of the number of gumdrops produced. MARR is 6%/year, and 30 million gumdrops are produced each year.What is the future worth of each machine?Machine 7745: $______________Entry field with incorrect answerMachine A37Y: $_______________Entry field with incorrect answer
Business
1 answer:
Dafna11 [192]2 years ago
5 0

Answer:

MACHINE 7745: -20,862.72

MACHINE A37Y: -18,281.02

Explanation:

production: 30,000,000

<u>Machine 1</u>

cost 10,000

life 10 years

salvage value 1,000

operating cost 0.01 per 1000 units. 0.01 x 30,000,000/1,000 = 300

Minimun accepted rate of retrun 6%

<u>Future value of the Operating cost</u>

C \time \frac{(1+r)^{time} -1}{rate} = FV\\

C = 300

r = 0.06

time = 10

300 \time \frac{(1+0.06)^{10} -1}{0.06} = FV\\

FV  -$3,954.24

<u>Future Value of the Investment</u>

Principal \time (1+ r)^{time} = Amount

10,000\time (1+ 0.06)^{10} = -17,908.48

Total -17,908.48 - 3,954.24 + 1,000 = -20,862.72

<u>Machine 2</u>

8,000

life 10 years

no salvage value

operating cost 300

<u>FV of the operating cost:</u>  - 3,954.24

<u>FV of the Investment:</u>        -14,326.78

8,000\time (1+ 0.06)^{10} = -14,326.78

Total: -3,954.24 - 14,326.78 = -18,281.02

Edit: sorry but the math toll is not working as it should be =(

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