Make or Buy Alternative 12. Your production line uses 10,000 filter housings per week at a cost of $0.85 per unit. Should you start making them yourself? MARR = 12%. Make Buy Capital Expenditure Salvage (after 10 yr) Annual O/M $240K $45K Materials $233K $442K

Cost Reimbursement (break-even) 13. It costs $3400 for a first-class roundtrip from Boston to London (6560 miles) and there are 3 trips per week. Assuming an MARR of 15% and the following data, how many passengers must fly per trip on average? Item Cost $12,000K 15 years $2000K $225K $0.67 Initial Cost Service Life Salvage Value Annual Crew (labor) Fuel cost per mile Catering per person Fee per landing Maintenance per yr Insurance per yr $75 $250 $237K $166K

We project unit sales for a new household-use laser-guided cockroach search and destroy system as follows: Year 1 2 3 4 5 NPV Unit Sales 95,500 107,500 130,500 136,500 89,500 The new system will be priced to sell at $420 each. The cockroach eradicator project will require $1,900,000 in net working capital to start, and total net working capital will rise to 15% of the change in sales. The variable cost per unit is $290, and total fixed costs are $1,400,000 per year. The equipment necessary to begin production will cost a total of $17 million. This equipment is mostly industrial machinery and thus qualifies for CCA at a rate of 20%. In five years, this equipment will actually be worth about 20% of its cost. The relevant tax rate is 35%, and the required return is 18%. Based on these preliminary estimates, what is the NPV of the project? (Enter the answer in dollars. Do not round your intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response.)