Make or BuyChapter $12$ Assignment: Capital Budgeting

An investment opportunity costing $$85,000$ is expected to yield net cash flow $$15,000$ annually

over $10$ years.

a$.$ Calculate the NPV of the investment at a discount rate of $10\%?$

b$.$ Does this capital project appear to be a favorable investment? Why or Why Not?

Ex$.$ Smith manufactures their own computer parts. Smith makes $400,000$ computer parts

per year. The following information has been collected:

Jones Computing Company has offered to provide the computer parts for $$4\mathrm{.}00$ per unit.

Assume no other productive use of the space exists. Should Smith accept the offer and why?