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A company manufactures a part with the value of 120$. The cost to manufacture the part is consist of 50% raw material, 30% energy, 20% is other costs including worker costs. Annual manufacturing

A company manufactures a part with the value of 120$. The cost to manufacture the part is consist of 50% raw material, 30% energy, 20% is other costs including worker costs. Annual manufacturing capacity of the company is 100,000 pieces and this will stay constant in the following 10 years. After the 10 years, capacity will decrease by 5% each year for 5 years. Raw material costs will increase by 12% annually for the first 10 years and 15% for the following 5 years. Energy costs will increase by 16% annually for the first 10 years and will stay constant after the first 10 years. Other costs will increase by 19% annually. Annual discount rate is 13%. Please calculate:
a) Price change of the part for the first 10 years and the following 5 years (%)
b) Price of the part after 15 years.
c) Cost change of total manufacturing for the first 10 years and the following 5 years (%)
d) Present value of the manufacturing costs of 15 years

Apr 17 2021 View more View Less

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