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Use the Following Information to Answer the Question(s)below

question 94

Multiple Choice

Use the following information to answer the question(s) below.
Galt Motors currently produces 500,000 electric motors a year and expects output levels to remain steady in the future.It buys armatures from an outside supplier at a price of $2.50 each.The plant manager believes that it would be cheaper to make these armatures rather than buy them.Direct in-house production costs are estimated to be only $1.80 per armature.The necessary machinery would cost $700,000 and would be obsolete in 10 years.This investment would be depreciated to zero for tax purposes using a 10-year straight line depreciation.The plant manager estimates that the operation would require additional working capital of $40,000 but argues that this sum can be ignored since it is recoverable at the end of the ten years.The expected proceeds from scrapping the machinery after 10 years are estimated to be $10,000.Galt Motors pays tax at a rate of 21% and has an opportunity cost of capital of 14%.
-The NPV of manufacturing the armatures in-house is closest to:

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Definitions:

Revise

To review, alter, and amend content or documents with the intention of making corrections or improvements.

Future Business

Planning and strategies aimed at navigating the challenges and leveraging opportunities that lie ahead for a business.

Requests For Information

Formal inquiries made to gather detailed data or facts on a specific subject or project.

Inductive Outline

An organizational structure that begins with specific details and leads to a general conclusion or statement.