points awarded
Racer Industries is currently purchasing Part No from an outside supplier for $ per unit. Because of supplier reliability problems, the company is considering producing the part internally in an idle manufacturing expected to total units at variable manufacturing costs of $ per unit.
Racer must acquire $ of new equipment if it reopens the plant. The equipment has a year service life, a $ salvage value, and will be depreciated by the straightline method. Repairs and maintenance are expected to average $ per year in years and the equipment will be sold at the end of its life.
tableYearFV of $ atFV of an ordinary,PV of $ atPV of an ordinaryannuity at
Required:
Use the netpresentvalue method totlcost approach and a hurdle rate to determine whether Racer should make or buy Part No Ignore income taxes. Negative amounts should be indicated by a minus sign. Round your answers to the nearest dollar amount.
tableBuy: Purchase,$
