manufacture of such a stopper would imply that the company will buy a machine whose cost would be $3,300,000 and salvage value after 5 years of use would be $100,000. Also, to operate and maintain this machinery, the company incurred annual fixed costs of $500,000 and variable costs of $5/cap. If the company needs 500,000 caps a year and The Trema that applies is 15% per year, what decision would be more profitable for the company: continue to buy gas caps or manufacture them? Solve the problem using the IRR criterio
manufacture of such a stopper would imply that the company will buy a machine whose cost would be $3,300,000 and salvage value after 5 years of use would be $100,000. Also, to operate and maintain this machinery, the company incurred annual fixed costs of $500,000 and variable costs of $5/cap. If the company needs 500,000 caps a year and The Trema that applies is 15% per year, what decision would be more profitable for the company: continue to buy gas caps or manufacture them? Solve the problem using the IRR criterio
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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Question
A car manufacturing company analyzes the possibility of manufacturing the gas cap of their cars.
Currently, the company buys at $8 each stopper to a supplier.
The manufacture of such a stopper would imply that the company will buy a machine whose cost would be $3,300,000 and salvage value after 5 years of use would be $100,000.
Also, to operate and maintain this machinery, the company incurred annual fixed costs of $500,000 and variable costs of $5/cap.
If the company needs 500,000 caps a year and The Trema that applies is 15% per year,
what decision would be more profitable for the company:
continue to buy gas caps or manufacture them?
Solve the problem using the IRR criterion.
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