What is the net present value of buying the part instead

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Reference no: EM132018710

X Company currently makes 7,500 units of a component part each year, but is considering buying it from a supplier for $8.70 each. The current annual cost of making the part is $68,450. The supplier wants X Company to sign a contract for the next five years. If X Company buys the part, it will be able to sell the equipment that it currently uses to make the part for $10,000, but the equipment will have no salvage value at the end of five years. Assuming a discount rate of 3%, what is the net present value of buying the part instead of making it?

Reference no: EM132018710

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