(Present Value Tables Are Required

question 90

Multiple Choice

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

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Definitions:

Automatic Processing

The unconscious encoding of incidental or well-practiced information, such as space, time, frequency, and the meaning of words.

Encoding Failure

A situation where information fails to be stored into long-term memory, leading to the inability to recall it later.

Proactive Interference

The phenomenon where old information hinders the recall of newly learned information.

Repressed Memories

Memories that are involuntarily repressed because they are linked to severe trauma or stress.