Question $16(1$ point$)$

Teagyn corp. produces PITAs and has a choice of upgrading or replacing a piece of

equipment. The upgrade would cost $$25M$ and have an operating cost per unit of

$$62,000.$ Replacing the equipment would cost $$39M$ and would reduce operating

costs per unit from the upgrade estimate by $10\%.$ Replacing would also allow the

current machine to be sold for $$3M$ now. Regardless of the choice, Teagyn forecasts

sales of $460$ units at $$80,000$ per unit and expects unit sales to grow at $10\%$ per year

over the next four years $($five years in total, selling price and costs would remain the

same$).$ Use a WACC of $12\%$ and to compare these choices.

What would the cost reduction percent decrease to change the decision on an NPV

basis? Please consider the changes in steps of whole percents $($i$.$e$.11\%$ to $12\%).$

Please enter your response with no units or commas and $0$ decimal places $($whole

numbers$)$: $"21\mathrm{.}1\%"$ would be $"21"($note: NO units and use $5/4$ rounding$).$

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