You are required to decide if the company should make or buy components of a machine they manufacture in-house. The annual interest is 8%. The information is presented below:

Making the components for this machine in-house:

Expenses incurred on an annual basis

Description	Year 0	Year 1	Year 2	Year 3	Year 4
Plant and equipment	R2 500
Manufacturing costs		R250	R300	R350	R400
Opportunity cost (assembly line)		R345	R290	R300	R350

The machine is decommissioned at the end of the fourth year at zero value.

Cost related to buying these components:

The cost of buying the components is as follows.

Year 0 R0; Year 1 R900; Year 2 R475; Year 3 R800; Year 4 R950.

Question:

Which option is cheaper for the company? Show all the calculations. (25 marks)