Computation of equivalent annual cash flows

Reference no: EM1311908

Computation of Equivalent Annual cash flows for making decision regarding Bid Price.

Calculating a Bid Price

Heer Enterprises needs someone to supply it with 252,000 cartons of machine screws per year to support its manufacturing needs over the next 7 years, and you've decided to bid on the contract. It will cost you $1,310,400 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 7 years, this equipment can be salvaged for $84,000. Your fixed production costs will be $403,200 per year, and your variable production costs should be $126.000. If your tax rate is 32 percent and you require a 17 percent return on your investment, you should submit a bid price of $________. (Round your answer to 2 decimal places, e.g 32.16)

Reference no: EM1311908

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