Racer Industries is currently purchasing Part No.76 from an outside supplier for $90 per unit....
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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 plant. Annual volume over the next years is 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.
Year FV of $ at
FV of an ordinary annuity at PV of $ at
PV of an ordinary annuity at
Required:
Use the netpresentvalue method totalcost 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.
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