Problem 6: A firm expects to sell 8,000 pieces per year during the next 10 years...

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Problem 6: A firm expects to sell 8,000 pieces per year during the next 10 years (sale price = 7.2 / unit). It can buy the pieces from a supplier at a fix price of 4.85/unit, or it can buy a machine for 125,000 and builds the pieces itself: in the latter case, the production cost is 2.8/unit. Knowing that the interest rate is 5.25% and that in both cases, it will need to buy a warehouse for 52,000, determine which variant is preferable (do not consider the amortization of the machine, of the warehouse, neither the taxation effects). Problem 6: A firm expects to sell 8,000 pieces per year during the next 10 years (sale price = 7.2 / unit). It can buy the pieces from a supplier at a fix price of 4.85/unit, or it can buy a machine for 125,000 and builds the pieces itself: in the latter case, the production cost is 2.8/unit. Knowing that the interest rate is 5.25% and that in both cases, it will need to buy a warehouse for 52,000, determine which variant is preferable (do not consider the amortization of the machine, of the warehouse, neither the taxation effects).

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To determine which variant is preferable we need to calculate the total cost for each option o... View the full answer