Byer, a Plastics Processor, Is Considering the Purchase of a High-Speed

question 90

Multiple Choice

Byer, a plastics processor, is considering the purchase of a high-speed extruder as one option. The new extruder would cost $47,000 and would have a residual value of $5000 at the end of its 6-year life. The annual operating expenses of the new extruder would be $4000. The other option that Byer 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 $11,000 per year and does not have a residual value. Byer's discount rate is 12%. Using net present value analysis, which option is the better option and by how much? Present Value of $1
Present Value of Annuity of $1

• A)Better by $21,777 to rebuild existing extruder
• B)Better by $21,777 to purchase new extruder
• C)Better by $24,312 to rebuild existing extruder
• D)Better by $24,312 to purchase new extruder

---

Definitions:

Corrective Actions

Steps taken to rectify a process, issue, or behavior that deviates from the set standard, aiming to prevent recurrence of the deviation.

Anticipates Problems

The ability to foresee and address issues before they manifest into significant challenges.

Transactional Leadership

A leadership style that focuses on the exchange between leader and followers, where leaders offer rewards for achievement and punishment for failure.

Management By Exception

A management strategy where managers intervene only when their employees' performance deviates significantly from standards, focusing on exceptions to normal work rules.