Marvec needs to replace an extruder and two replacements look good
January 12th, 2018
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. B, $564 B, $2,388 A, $1,646 A, $280 18