A manufacturer wishes to make and sell 1.1 million units per year of an aviation part...

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A manufacturer wishes to make and sell 1.1 million units peryear of an aviation part for 12 years with interest fixed at 14%per year. Option A is to build a manufacturing plant in the UnitedStates at a cost of $7 million, with endof-year expenses of $2million per year. In order to meet environmental regulations, themanufacturer will need to invest $0.5 million for pollution controlat the end of the fifth year. Option B is to build a manufacturingplant in Mexico for $4 million, with annual end-of-year expenses of$1.2 million. There will be a duty charge of 30% of the sellingprice in the United States. Find the aviation part selling price inthe United States, at which the two options are equal.

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Time 12 yearsAnnual Unit Sales 11 millionDiscounting Rate 14 per yearLet selling price of aviation See Answer

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A manufacturer wishes to make and sell 1.1 million units peryear of an aviation part for 12 years with interest fixed at 14%per year. Option A is to build a manufacturing plant in the UnitedStates at a cost of $7 million, with endof-year expenses of $2million per year. In order to meet environmental regulations, themanufacturer will need to invest $0.5 million for pollution controlat the end of the fifth year. Option B is to build a manufacturingplant in Mexico for $4 million, with annual end-of-year expenses of$1.2 million. There will be a duty charge of 30% of the sellingprice in the United States. Find the aviation part selling price inthe United States, at which the two options are equal.