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Another utilization of cash flow analysis is setting the bid price on a project. To calculate the bid price, we set the project NPV equal to zero and find the required price. Thus the bid price represents a financial break-even level for the project. Guthrie Enterprises needs someone to supply it with 150,000 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 $1,900,000 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 $160,000. Your fixed production costs will be $275,000 per year, and your variable production costs should be $9.50 per carton. You also need an initial investment in net working capital of $140,000. If your tax rate is 40 percent and you require a return of 12 percent on your investment, what bid price per carton should you submit?
Assume a perfectly competitive firm is currently producing 5,000 units of output and is earning $15,000 in total revenue. The marginal cost of the 5,000th unit of output is $3. The corresponding average total cost is $3.50 and total fixed costs equal..
All Industries can increase the volume of goods or services sold by cutting prices.
Which of the following possible in-kind transfers do you think raises the true income of recipients the most: free golf lesson, free transportation on public buses, or free food? Why?
Elucidate the underlying experiment of interest when we want to examine the effects of cigarette smoking on workdays lost.
What was the rate of growth of per capita real GDP before the increase in population growth? If the rate of growth of real GDP remains unchanged, what is the new rate of growth of per capita real GDP following the increase in the birth rate?
In Chapter 11 you read about centralized and decentralized decision making. Between the two philosophies which do you feel works better and why? Feel free to include any experiences you have had under each atmosphere.
For the United States, empirical studies indicate that over the past two decades the cost of international transportation relative to the value of U.S. imports has: Should international transportation costs decrease, the effect on international trade..
The elasticity of demand for cigarettes is estimated to be about - 0.5. Assume the elasticity of supply of cigarettes is 1. If the government places a tax of $0.60 on cigarettes, how much will the price of cigarette increase (approximately)?
We discussed in class several of the dependent variables that need to be considered when managing people (performance, job satisfaction, turnover, absenteeism, organizational citizenship behavior, deviant workplace behavior). Select two of these and ..
What's the impact of changes of the industry or economy, competitor actions on Fovever 21 Company? What are the expectations of shareholders, stock analysts, and rating agencies from Forever 21 Company?
You have been asked to produce a forecast for your company's new product (bottled water). List out and briefly describe four factors you would consider before giving the forecast.
Suppose the government imposes a price ceiling of $50 on a market characterized by the following information: Qd=700-2p Qs=100+4p Calculate the magnitude of deadweight loss form the price ceiling. Find a price floor that will result in the same magni..
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