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One of Greece's plants sells a custom product at $1,650, with a per unit cost of $1,400. The plant manager has two suggestions to increase
One of Greece's plants sells a custom product at $1,650, with a per unit cost of $1,400. The plant manager has two suggestions to increase producion by 500 units per year:
In the first option, the engineering team has submitted a proposal to install new machinery for an additional $500,000. Assuming: straight-line method with zero salvage value and 10 years useful life.
The second choice is to use the plant's existing equipment but hire an additional person at $30,000 per year. The cost of capital is 11%. Assume a tax rate of 33 %.
1. What is the EVA of the first option?
2. What is the EVA of the secon option?
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