Komoka Enterprises needs someone to supply it with 72,000 cartons of machine screws per year to support its manufacturing needs over the next five years, and you've decided to bid on the contract. It will cost you $950,000 to install the equipment necessary to start production. The equipment will be depreciated at 30% ( Class 10), and you estimate that it can be salvaged for $88,000 at the end of the five-year contract. Your fixed production costs will be $320,000 per year, and your variable production costs should be $15.50 per carton. You also need an initial net working capital of $150,000. If your tax rate is 35% and you require a 14% return on your investment, what bid price should you submit? Keep intermediate results to at least 5 decimal places, Minimum Bid price to 2 decimal places is $

Komoka Enterprises needs someone to supply it with 72,000 cartons of machine screws per year to support its manufacturing needs over the next five years, and you've decided to bid on the contract. It will cost you $950,000 to install the equipment necessary to start production. The equipment will be depreciated at 30% ( Class 10), and you estimate that it can be salvaged for $88,000 at the end of the five-year contract. Your fixed production costs will be $320,000 per year, and your variable production costs should be $15.50 per carton. You also need an initial net working capital of $150,000. If your tax rate is 35% and you require a 14% return on your investment, what bid price should you submit? Keep intermediate results to at least 5 decimal places, Minimum Bid price to 2 decimal places is $

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 14P

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