Topic 7 Capital Budgeting 2 Tutorial '1',le Project NPV A widget manufacturer currently produces 203,000 units a year. It buys widget lids from an outside supplier at a price of $2 a lid. The plant manager believes that it would be cheaper to make these lids rather than buy them. Direct production costs are estimated to be onlyr $1.50 a lid. The necessary machinery would cost $150,000 and would last 10 years. This investment could be written o for tax purposes using the seven-year tax depreciation schedule. The plant manager estimates that the operation would require additional working capital of $30,000 but argues that this sum can be ignored since it is recoverable at the end of the 10 years. Ifthe company pays tax at a rate of 35% and the opportunity cost of capital is 15%, would you support the plant manager's proposal? State clearlyr any additional assumptions that you need to make