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?Figgey, a plastics? processor, is considering the purchase of a high?speed extruder as one option. The new extruder would cost $48,000 and would have a

?Figgey, a plastics? processor, is considering the purchase of a

high?speed extruder as one option. The new extruder would cost $48,000

and would have a residual value of $7,000

at the end of its6?year

life. The annual operating expenses of the new extruder would be$10,000.

The other option that Figgey has is to rebuild its existing extruder. The rebuilding would require an investment of

$40,000

and would extend the life of the existing extruder by

6 years. The existing extruder has annual operating costs of

$15,000

per year and does not have a residual value. Figgey discount rate is

12?%.

Using net present value? analysis, which option is the better option and by how? much?

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