(Present Value Tables Are Required

question 63

Multiple Choice

(Present value tables are required.) Stensels,a plastics processor,is considering the purchase of a high-speed 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.Stensels' discount rate is 14%.Using net present value analysis,which option is the better option and by how much?

• A)Better by $4,328 to rebuild existing extruder
• B)Better by $4,328 to purchase new extruder
• C)Better by $6,083 to rebuild existing extruder
• D)Better by $6,083 to purchase new extruder

Analyze the factors affecting saving, investment, and capital accumulation in DVCs.

Grasp the role and effects of foreign aid and microcredit on DVC development.

Understand the components and importance of a nation's infrastructure in its development.

Recognize the barriers to transferring technologies from IACs to DVCs.

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Definitions:

Profit-maximizing

A process where a business establishes the price and production scale that ensures the highest return.

Demand

The quantity of a good or service that consumers are willing and able to purchase at various prices during a certain period.

Two-part Tariff

A pricing strategy that includes a fixed fee plus a variable fee based on consumption or usage level.

Marginal Cost

The financial outlay required to produce a further unit of a product or service.