Net present value of buying part instead of making

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Reference no: EM132020174

X Company currently makes 7,500 units of a component part each year, but is considering buying it from a supplier for $8.00 each. The current annual cost of making the part is $64,700. The supplier wants X Company to sign a contract for the next six years. If X Company buys the part, it will be able to sell the equipment that it currently uses to make the part for $16,000, but the equipment will have no salvage value at the end of six years. Assuming a discount rate of 4%, what is the net present value of buying the part instead of making it?

Reference no: EM132020174

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