Course Contents Timer NotesEalate Feecback PrintInf SECOND CHANCE DAM 2-?stion 8

Question

Course Contents Timer NotesEalate Feecback PrintInf SECOND CHANCE DAM 2-?stion 8 X Company currently makes 7,000 units of a component part each yeac, but is no salvage value at the end of six years considering buying i from a supplier for $8.90 each. The current annual cost of Is the net present value of buying the part instead of making it? s $65,500. The supplier to sign a contract for the next six years. If X Company buys the part, it will be able Assuming a discount rate of y%, what to sell the equipment that it currently uses to make the part for $14,000, but the equipment will have 2Communication Blocked Send Feedback

Explanation / Answer

Savings in cost on buying: Cost of Buying (7000 units @8.90) 62300 Less: Cost of manufacture 65500 Savings in cost 3200 Annnuity present value factor @3% for year6 5.4172 Present value of Savings in cost 17335 ($3200*5.4172) Add: Sale of equipment 14000 Net presnt value 31335

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