Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

A brycle manufecturer currently produces 296.000 units a year and oxpects oueput levels to romwin steacy in the future. It buys chains from an outside

image text in transcribed
A brycle manufecturer currently produces 296.000 units a year and oxpects oueput levels to romwin steacy in the future. It buys chains from an outside suppler at a price of 51 . 90 a chain. The plast cost $765.060 and would be obsolete after ten years. This investment could be depreciated to zero for tax purposes using a ten-year straight-1ine deproclasion ischedule. The plant manager estanatos that the operafion would requere 539,000 of invertocy and other working capital upteont (year 0 ), but argues that this sum can bo ignoced since is is recoverable at the end of the len years. Expected proceeds from scrappieg the machinery after Sen yews are $19.975. If the company coys lax at a rale of 20% and the opportunily cost of capest is 15%, what is the net present value of the decision to produce the chains in-house instesd of purchasing them trom the auppler? Project the enemal free cash flows fFCFi of buying the chains. The arnual free cash flows for years 1 to to of burng the chains is 1 (Round to the nearest dollar, Enter a free cash oveflow at a negative number.)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Finance Bundling And Finance Transformation

Authors: Frank Keuper, Kai-Eberhard Lueg

1st Edition

3658042109, 978-3658042103

More Books

Students also viewed these Finance questions