A widget manufacturer currently produces

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A widget manufacturer currently produces 300,000 units a year. It buys widget lids from an outside supplier at a price of $4 a lid. The plant manager believes that it would be cheaper to make these lids rather than buy them. Direct production costs are estimated to be only $2 a lid. The necessary machinery would cost $250,000 and would last 5 years. If the company pays a tax at a rate of 35% and the opportunity cost of capital is 15%, would you support the plant manager's proposal? State clearly any additional assumptions that you need to make.

Reference no: EM13809163

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