Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Sly, a plastios processor, is considering the purchase of a high - speed extruder as one option. The new extruder would cost $46,000 and would
Sly, a plastios processor, is considering the purchase of a high - speed extruder as one option. The new extruder would cost $46,000 and would have a residual value of $4,000 at the end of its 6 - year life. The annual operating expenses of the new extruder would be $5,000. The other option that Sly 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 $10,000 per year and does not have a residual value. Sly's discount rate is 12%. Using net present value analysis, which option is the better option and by how much? A. Better by $16,583 to purchase new extruder B. Better by $14,555 to purchase new extruder C. Better by $16,583 to rebuild existing extruder D. Better by $14,555 to rebuild existing extruder
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started