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Sly, a plastics processor, is considering the purchase of a high - speed extruder as one option. The new extruder would cost $53,000 and would
Sly, a plastics processor, is considering the purchase of a high - speed extruder as one option. The new extruder would cost $53,000 and would have a residual value of $7,000 at the end of its 6 - year life. The annual operating expenses of the new extruder would be $4,000. The other option that Sly 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 6 years. The existing extruder has annual operating costs of $10,000 per year and does not have a residual value. Sly's discount rate is 14%. Using net present value analysis, which option is the better option and by how much? A. Better by $334 to purchase new extruder B. Better by $3,526 to rebuild existing extruder C. Better by $3,526 to purchase new extruder D. Better by $334 to rebuild existing extruder
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