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Stensels, a plastics processor, is considering the purchase of a high speed extruder as one...

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Accounting

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. The existing operating costs will not change with the rebuidling. Stensels' discount rate is 14%. Using net present value analysis, which one of the following options is the better option and by how much?

A.

Better by $4,330 to rebuild existing extruder

B.

Better by $4,330 to purchase new extruder

C.

Better by $6,083 to rebuild existing extruder

D.

Better by $6,083 to purchase new extruder

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