Question

Your company must either purchase or make 100,000 units per year over the next 5 years. To make the products yourselves, the project requires an $11 Million investment at n=0, and it requires $1.4 Million per year in operating expenses. In addition, a $2 Million dollar one-time machinery overhaul must be performed at the end of year 3. Assume the machinery has a salvage value of $1 Million at the end of year 5. Finally, assume that raw materials and inventory costs are $14 per unit. Purchasing the units requires a one-time down payment of $1 Million at n=0, and the remaining cost of $55 per unit will be paid at the end of each year. The project's MARR = 12%.

What is the total unit cost to make the products based on the annual worth approach (enter into the box with no dollar sign to the nearest 0.01 dollars)

Answer 1