Magnum Electronics Company expects a demand of 20 000 units per year for a special-purpose component during

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Magnum Electronics Company expects a demand of 20 000 units per year for a special-purpose component during the next six years. Net return per unit is $4. To produce the component, Magnum must buy a machine costing $250 000 with a life of six years and a salvage value of $40 000 after six years. The company estimates that repair costs will be $20 000 per year during Years 2 to 6. If Magnum requires a return on investment of 18%, should it market the component?
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Contemporary Business Mathematics with Canadian Applications

ISBN: 978-0133052312

10th edition

Authors: S. A. Hummelbrunner, Kelly Halliday, K. Suzanne Coombs

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