1.) In your own words describe how to calculate the net present value of an investment and why this type of analysis is better than just calculating cash payback?

2.) Tex's Manufacturing Company can make 100 units of a necessary component part with the following costs:

Direct Materials $60,000

Direct Labor 10,000

Variable Overhead 30,000

Fixed Overhead 20,000

If Tex's Manufacturing Company can purchase the component externally for $110,000 and only $5,000 of the fixed costs can be avoided, what is the correct make-or-buy decision?

	1.	Make and save $5,000
	2.	Make and save $15,000
	3.	Buy and save $15,000
	4.	Buy and save $5,000