Calculate the npv for option one

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A toy manufacturer has two options to acquire electronic component for existing products. Option one: pay a sub-contractor $600,000 (before tax) a year. Option two: produce the component by itself. Assume the production will last for four years. If the tax rate is 35% and the cost of capital is 15%. Assume all operating cash flows occur at the end of the year.

Calculate the NPV for Option one?

Reference no: EM132504204

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