Your company is currently paying an outside firm $240,000 per year to manufacture products for your...

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Your company is currently paying an outside firm $240,000 per year to manufacture products for your company. You sell the products for $350,000 each year. You are considering moving the operations in house. To do so, you would need to spend $250,000 on equipment today which you are able to depreciate over five years. You will operate the equipment for 10 years before it needs to be replaced. You will need to pay salaries and benefits of $110,000 per year. You will also need to pay $100,000 per year on the goods used in manufacturing. Your company's tax rate is 20%. The appropriate discount rate is 9%. a) Should you move operations in house? b) If salaries and benefits will be $90,000 per year, would your decision change? c) If salaries and benefits will be $130,000 per year, would your decision change? Your company is currently paying an outside firm $240,000 per year to manufacture products for your company. You sell the products for $350,000 each year. You are considering moving the operations in house. To do so, you would need to spend $250,000 on equipment today which you are able to depreciate over five years. You will operate the equipment for 10 years before it needs to be replaced. You will need to pay salaries and benefits of $110,000 per year. You will also need to pay $100,000 per year on the goods used in manufacturing. Your company's tax rate is 20%. The appropriate discount rate is 9%. a) Should you move operations in house? b) If salaries and benefits will be $90,000 per year, would your decision change? c) If salaries and benefits will be $130,000 per year, would your decision change?

Answer rating: 100% (QA)

Determine whether I should move operations inhouse Given Initial equipment cost 250000 depreciated over five years Operating costs including salaries ... View the full answer