$
$
$
$
$
$
$
$
$
Cost to produce
200,000
5 years
40,000
5,000,000
1,000,000
3
2300 hours
8.50
1,500
18%
0.20
0.10
0.50
10%
35%
Making
Annual cost to purchase cans
Annual cost of direct material:
Need of 1,100,000 cans per year
Annual variable production costs per can
Other variable production costs per can
Annual cost of direct labor for new employees:
Payroll for the three employees
Annual health benefits
Other annual benefits
Total wages and benefits
Total annual production costs
Advantage of making parts
Purchasing
500,000
500,000
200,000
100,000
$
$
$
$
$
58,650
4,500
10,557
73,707
373,707 $
(126,293)
$
$
$
126,293
32,000
11,200
$
$
Before Tax
Amount
126,293
32,000
1.7 years
$
$
$
$
$
126,293
(32,000)
94,293
(33,003)
61,290
160,000
38.31%
Tax Effect
0.65 $
0.35 $
$
After Tax
Amount
82,090
11,200
93,290
Year
0
1-5
1-5
5
$
$
$
$
Before Tax
Amount
(200,000)
126,293
32,000
40,000
$
$
$
$
$
$
$
Amount
(200,000)
93,290
93,290
93,290
93,290
133,290
306,452
Year
0
1
2
3
4
5
IRR
39.23%
Tax %
$
0.65 $
0.35 $
$
After tax
Amount
(200,000)
82,090
11,200
40,000
12% PV
Factor
1
3.605
3.605
0.567
$
$
$
$
$
Present
Value
(200,000.00)
295,936.07
40,376.00
22,680.00
158,992.07