Question
Moon Micro is a small manufacturer of servers that currently builds its entire product in Santa Clara, CA. As the market for servers has grown
Moon Micro is a small manufacturer of servers that currently builds its entire product in Santa Clara, CA. As the market for servers has grown dramatically, the Santa Clara plant has reached capacity of 10,000 servers per year. Moon is considering two options to increase its capacity. The first option is to add 10,000 units of capacity to the Santa Clara plant at an annualized fixed cost of $10,000 plus $200 labor per server. The second option is to have Molectron, an independent assembler, manufacture servers for Moon at a cost of $3000 for each server (excluding raw materials cost).Raw materials cost $1000 per server, and Moon sells each server for $9,000. Assume discount rate of k=0.1. Compute NPV for outsourcing to Molectron.
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