Reference no: EM132909644
The technique for calculating a bid price can be extended to many other types of problems. Answer the following questions using the same technique as setting a bid price; that is, set the project NPV to zero and solve for the variable in question. Guthrie Enterprises needs someone to supply it with 148,000 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 $1,880,000 to install the equipment necessary to start production; you'll depreciate this cost straight-line to zero over the project's life. You estimate that in five years this equipment can be salvaged for $158,000. Your fixed production costs will be $273,000 per year, and your variable production costs should be $10.20 per carton. You also need an initial investment in net working capital of $138,000. The tax rate is 23 percent and you require a return of 14 percent on your investment. Assume that the price per carton is $16.80.
a.Calculate the project NPV. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
b.What is the minimum number of cartons per year that can be supplied and still break even? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
c.What is the highest fixed costs that could be incurred and still break even? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
|
Calculate altman z-score
: Using Altman's Linear Discriminant Model, calculate Altman's Z-score and state whether the loan should be approved
|
|
Briefly discuss the risk-return trade-off
: Briefly discuss the risk-return trade-off associated with managing bank liquidity
|
|
Determine the weighted cost of capital of illustrados
: Determine the weighted cost of capital of Illustrados that will finance its Project X44 with P80 million of long-term debt,12.5% and P120 million in retained ea
|
|
What is the minimum number of cartons
: The technique for calculating a bid price can be extended to many other types of problems. Answer the following questions using the same technique as setting a
|
|
Calculate the project npv
: The technique for calculating a bid price can be extended to many other types of problems. Answer the following questions using the same technique as setting a
|
|
What is the before tax value of interest subsidy
: To kick start its economy, Country X is offering subsidised loans to Australian companies willing to set up operations there. The loan is $25 million at 3% when
|
|
Briefly define capital risk
: Briefly define capital risk and explain how a positive leverage-adjusted duration gap can contribute to an adverse impact on capital.
|
|
Double-taxation agreement with arcadia
: The Tax Office of Arcadia (a fictitious country) just announced that it would scrap the 20% withholding tax imposed on interest payments paid to foreign investo
|
|
What is the npv of investment
: You have an opportunity to invest $110,000 now in return for $80,100 in one year and $30,200 in two years. If your cost of capital is 8.8%, what is the NPV of t
|