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2 0.362.5 points awarded Racer Industries is currently purchasing Part No.76 from...

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Accounting

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0.362.5 points awarded
Racer Industries is currently purchasing Part No.76 from an outside supplier for $81 per unit. Because of supplier reliability problems, the company is considering producing the part internally in an idle manufacturing expected to total 299,000 units at variable manufacturing costs of $76 per unit.
Racer must acquire $81,000 of new equipment if it reopens the plant. The equipment has a 6-year service life, a $14,100 salvage value, and will be depreciated by the straight-line method. Repairs and maintenance are expected to average $5,300 per year in years 4-6, and the equipment will be sold at the end of its life.
\table[[Year,FV of $1 at,FV of an ordinary,PV of $1 at,PV of an ordinary],[annuity at 10%,10%,0.909,0.909,],[1,1.100,1.000,0.826,1.736],[2,1.210,2.100,0.751,2.487],[3,1.331,3.310,0.683,3.170],[4,1.464,4.641,0.621,3.791],[5,1.611,6.105,0.564,4.355],[6,1.772,7.716,,]]
Required:
Use the net-present-value method (totl-cost approach) and a 10% hurdle rate to determine whether Racer should make or buy Part No.76. Ignore income taxes. (Negative amounts should be indicated by a minus sign. Round your answers to the nearest dollar amount.)
\table[[Buy: Purchase,$,105,473,255x
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