BUSI 408 - Tar Heel Electronics - Prof Solution (1)

BUSI 408 - Tar Heel Electronics - Prof Solution (1) -...

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Unformatted text preview: Alternatives NPV Difference In-House Production $(9,309) External Production (A) $(7,778) $1,531 Contract A is $1.5M better than in-house production External Production (B); Hi $(10,546) $(1,237) Contract B, at the same # of units, is $1.2M worse than in-house production External Production (B); Lo $(5,600) not the same unit support as the other 3 options, but provided for comparison Represents the INCREMENTAL impact as a result of choosing the specific option (not necessarily the project value as a standalone). Note: NPV's are negative because it's comparing cost only; financial choice would be to take the lowest cost 2012 2013 2014 2015 2016 Comments Demand (Mu) 5 6 5 2 2 Demand (Mu) low-end (for Contract B) 5 2.4 2 0.8 0.8 can reduce up to 60% of volume after 2010 Unit Cost (Contract A) $0.90 $0.90 $0.90 $0.90 $0.90 committed volume Unit Cost (Contract B) $1.18 $1.18 $1.18 $1.18 $1.18 Materials $0.15 $0.16 $0.16 $0.17 $0.18 Growing with inflation Inflation 4% Working Capital 15%of following year's material cost...
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This note was uploaded on 02/27/2012 for the course BUSI 407 taught by Professor Bowen during the Spring '11 term at UNC.

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BUSI 408 - Tar Heel Electronics - Prof Solution (1) -...

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