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An electronics company expects a demand of 40,000 units per year for a special-purpose component during the next six years. Net return per unit
An electronics company expects a demand of 40,000 units per year for a special-purpose component during the next six years. Net return per unit is $7. To produce the component, the company must buy a machine costing $1,160,000 with a life of six years and a salvage value of $45,000 after six years. The company estimates that repair costs will be $22,000 per year during Years 2 to 6. If the required rate of return on investment is 10%, should it market the component? The company market the component.
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