Question
Stensels, a plasticsprocessor, is considering the purchase of a highspeed extruder as one option. The new extruder would cost$50,000 and would have a residual value
Stensels, a plasticsprocessor, is considering the purchase of a highspeed extruder as one option. The new extruder would cost$50,000 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 Stensels 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. The existing operating costs will not change with the rebuidling. Stensels' discount rate is14%. Using net present valueanalysis, which one of the following options is the better option and by howmuch?
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