Managers need all of the following information to determine if the firm should make or buy an input except which one?
A)the firm's discount rate
B)the quantity of the input the firm needs each year
C)the present value of the firm's current profit
D)the salvage rate of the equipment to make the input

Question

Quizplus · Accepted Answer

The present value of the firm's current profit is not relevant to the make-or-buy decision. The firm needs to consider the cost of producing the input internally versus the cost of purchasing it externally. The discount rate is important because it affects the present value of future cash flows, the quantity of the input needed each year is important because it affects the total cost, and the salvage rate of the equipment is important because it affects the cost of producing the input internally.

Managers Need All of the Following Information to Determine If