Computation of investment bid price at given cost of capital

Assignment Help Finance Basics

Reference no: EM1313858

Your firm is thinking about making a bid to sell 185,000 cartons of machine screws per year over the next five years to a manufacturer that uses the screws in its production process. It will cost your firm $940,000 to install the equipment necessary to start production of the screws, and the cost of that equipment will be depreciated (to zero) on a straight-line basis over the life of the project. It is estimated that the equipment can be salvaged at the end of Year 5 for $70,000. Your fixed production costs will be $305,000 per year, and your variable production costs should be $9.25 per carton. You will also need an initial investment in net working capital of $75,000 (to be returned at the end of the project). If your tax rate is 35 percent and you require a 12 percent return on your investment, what bid price should you submit?

Reference no: EM1313858

Questions Cloud

Find common stock outstanding : When a corporation has both preferred and common stock outstanding, earnings per share is computed by dividing net income

Chi-square for independence of attributes and marasuilo : Is there evidence of a difference in objection to sharing information among the organizational groupings? (use α = 0.05)

Advertising expenditures for the year : Kramer Smith owns a dry-cleaning service also is thinking about changing his advertising expenditures for the year.

Rising the probability of best case scenario : If campaign can be expected to also to rise the probability of best case scenario to 0.4, is it a good investment.

Computation of investment bid price at given cost of capital : Computation of investment bid price at given cost of capital and you will also need an initial investment in net working capital of $75,000

Equivalent units for conversion costs : Calculation of the equivalent units for conversion costs in process costing and What were the equivalent units for conversion costs in the Lubricating Department for October

Customer value from each of the subsequent products : Illustrate what are some of the benefits also costs which contribute to your customer value from each of the subsequent products.

Relationship between the outputs and the unemployment rate : When and why were the inflation and unemployment rates negatively correlated? When and why were the inflation and unemployment rates positively correlated?

Evaluation of cost per equivalent : Evaluation of cost per equivalent unit for conversion costs for the month and What would be the cost per equivalent unit for conversion costs for the month?

User Account

All Pages