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practice solution

# practice solution - #4 a DM Price AQp 1,100,000 AQp...

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#1 Make: Buy: DM 200,000*30 =   6,000,000  Cost 200,000*110 = DL 200,000*20 =   4,000,000  FMOH  8,000,000  Opp. Cost  2,400,000   20,400,000  *Cheaper to make/increases net income by \$1,600,000 #2 If he accepts: SP  800,000  *VC: DM 400,000 (VC)*  (600,000) DL 200,000 CM  200,000  (Add'l FC)  (25,000) Incr. NI  175,000  *Accept it! #3 Option 1: Inflows Outflows CF: 20,000*6.710 =  134,200  Initial:  40,000  Balloon: 10,000*.463 =  4,630        138,830   (40,000) \$98,830  Option 2: Inflows Outflows Revenue 15,000*7.904 =  118,560  Cost Salvage 15,000*.368 =  5,520  Maintenan 1,000*7.904 =   124,080  \$56,176  While both exceed RRR, choice 1 has higher NPV so better c

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Unformatted text preview: #4 a) DM Price: AQp 1,100,000 AQp 1,100,000 *AP 3.05 *SP 3.25 3,355,000 3,575,000 \$220,000 F b) DM Quantity: AQu 1,045,000 SQ 790,000 *SP 3.25 *SP 3.25 3,396,250 2,567,500 \$828,750 U c) DL Rate: AH 1,430,000 AH 1,430,000 *AR 12.50 *SR 12.00 17,875,000 17,160,000 \$715,000 U d) DL Efficiency: AH 1,430,000 SH 1,580,000 *SR 12.00 *SR 12.00 17,160,000 18,960,000 \$840,000 F e) DL overall \$125,000F 22,000,000 60,000 7,904 (67,904) choice!...
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practice solution - #4 a DM Price AQp 1,100,000 AQp...

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