2. A company produces deluxe widgets. It has a capacity of 280,000 units per year. The fixed annual cost of the processis $4,000,000. The widgets sell for $ 50 each. Each widget requires parts and labor to make. a. What is the maximumthe company can pay (parts and labor) per unit for manufacture? (don't consider time value of money) b. If theestimated costs were $25 per unit, and the MARR were 15% for a potential purchaser (of the company), what is themaximum sales price to buy the company considering a life of 20 years? c. If the cost to produce the units increases at5% per year, but sales price remains $ 50, how long could the company operate at a profit? (After how many years withthe production cost increasing would it take for the net income to equal the fixed costs?

Capacity = 280,000 unitsFixed cost = $4,000,000Sale price = $50MARR = 15%

Answered: 2. A company produces deluxe widgets.…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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