
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Transcribed Image Text:28 A company is considering two methods for obtaining a certain part. Method A will
involve purchasing a machine for $50,000 with a life of 5 years, a $2,000 salvage value and a fixed
annual operating cost of $10,000. Additionally, each part produced by the method will cost $10.
Method B will involve purchasing the part from a subcontractor for $25 per part. At an interest rate of
10% per year, the number of parts per year required for the two methods to break even is
a. 1,333
b. 1,524
c. 1,850
d. 2,011
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