Marvec Needs to Replace an Extruder and Two Replacements Look

question 3

Multiple Choice

Marvec needs to replace an extruder and two replacements look good. Extruder A costs $102,000 and has a 10-year life. Extruder B costs only $56,000, but its expected life is 6 years. Extruder A will generate net cash flows of $17,600 per year for 10 years and B will generate net cash flows of $13,800 per year for 6 years. If Marvec's cost of capital is 11%, which extruder should be chosen and what is its NPV? Use equivalent annual annuities.

• A) Extruder B, $564
• B) Extruder B, $2,388
• C) Extruder A, $1,646
• D) Extruder A, $280

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Multivariate Regression

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