The NPV for Galt Motors of manufacturing the armatures in house is closest to:
A) 1,095,000
B) 1,215,000
C) 1,225,000
D) 1,250,000

Question

Quizplus · Accepted Answer

C) CF0 = -700,000 + - 40,000 = -740,000
CF(1 - 9) = 500,000 units × ($2.50 - $1.80) + .35 × 700,000/10 = 374,500
CF(10) = 500,000 units × ($2.50 - $1.80) + .35 × 700,000/10 + 40,000 = 414,500
CF0 = -740000, CFj = 374500. nj = 9, CFj = 414500, Nj = 1, I = 14, compute NPV = 1,224,225

The NPV for Galt Motors of Manufacturing the Armatures in House