Question: (Present value tables are required.) Figgey, a plastics processor, is considering the purchase of a high- speed extruder as one option. The new extruder would
(Present value tables are required.) Figgey, a plastics processor, is considering the purchase of a high- speed extruder as one option. The new extruder would cost $52,000 and would have a residual value of $5,000 at the end of its 8-year life. The annual operating expenses of the new extruder would be $8,000. The other option that Figgey has is to rebuild its existing extruder. The rebuilding would require an investment of $30,000 and would extend the life of the existing extruder by 8 years. The existing extruder has annual operating costs of $11,000 per year and does not have a residual value. Figgey discount rate is 14%. Using net present value analysis, which option is the better option and by how much? Better by $6,328 to purchase new extruder Better by $6,328 to rebuild existing extruder Better by $8,083 to rebuild existing extruder Better by $8,083 to purchase new extruder
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