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

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8 years ago Edited: 8 years ago, duddy

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

(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?
A) Better by $6,328 to rebuild existing extruder
B) Better by $8,083 to purchase new extruder
C) Better by $6,328 to purchase new extruder
D) Better by $8,083 to rebuild existing extruder

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Managerial Accounting

Edition: 4^th

Author: Braun

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