Question: 6. You are deciding between two materials for a pasta extrusion factory, Teflon (T) and Bronze (B). Tefion lasts 2 months before requiring replacement, and
6. You are deciding between two materials for a pasta extrusion factory, Teflon (T) and Bronze (B). Tefion lasts 2 months before requiring replacement, and Bronze lasts 6 months. Pasta extruded through Bronze sells for a higher price in the marketplace, but the Bronze costs more upfront. The monthly discount rate is 0.75%. A summary of the cash flows, in thousands, is shown below. Teflon Bronze Month Cash Flow Month Cash Flow -18 6 (a) When purchased only once, which material generates more value? (b) If the materials were replaced every time they wore out, and the pasta factory is expected to run forever, which machine is the better choice
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
