Your company plans to buy from suppliers 1 million parts per year for the next 3 years

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(starting a year from today) at $5 per part. You are considering producing the parts instead.

The production facility costs $1.2 million today and is fully depreciated over the next 3 years. Production costs will be $4 per part. After 3 years you will be able to sell the facility for $50,000. The cost of capital is 10% and tax rate is 35%.

Should you invest in the production facility or keep buying the parts?

Related Book For answer-question

Financial Management for Public Health and Not for Profit Organizations

ISBN: 978-0132805667

4th edition

Authors: Steven A. Finkler, Thad Calabrese

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Posted Date: Mar 08, 2023 04:46 AM

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Your company plans to buy from suppliers 1 million parts per year for the next 3 years

Question:

Expert Answer:

o determine whether to invest in the production facility or keep buying parts we need to calculate the net present value NPV of both options NPV takes ... View the full answer

Financial Management for Public Health and Not for Profit Organizations

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