QUESTION

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New Growth Proposal After researching the market, RMC has determined that adding a new product would help stimulate growth and profitability. They are considering two options: 1) Manufacture the part themselves by buying new equipment 2) Outsource the part through a third-party vendor \begin{tabular}{ll} Option 1: Manufacture with New Equipment \\ Cost of New Equipment & $\$ 500,000$ \\ & 8 Years, \\ Loan Terms & $5 \%$ Fixed Interest \\ & $\$ 300,000$ \\ Expected Annual Revenue & $15 \%, 20 \%, 30 \%$ \\ Profit Margin After Tax (Including Interest): \\ Year 1, Year 2, Years 3-10 & \\ Option 2: Outsource \\ Expected Annual Revenue & $\$ 300,000$ \\ Annual Profit Margin After Tax & $10 \%$ \\ \hline \end{tabular} Return
For Option 1 of the Growth Proposal, how long would it take RMC to pay back the investment on new equipment?

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