will 28 A company is considering two methods for obtaining a certain part. Method 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

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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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
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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