Depreciated on straight-line basis to zero salvage value

Assignment Help Financial Management

Reference no: EM13765691

Your company has been approached to bid on a contract to sell 4,900 voice recognition (VR) computer keyboards a year for four years. Due to technological improvements, beyond that time they will be outdated and no sales will be possible. The equipment necessary for the production will cost $ 4.5 million and will be depreciated on a straight-line basis to a zero salvage value. Production will require an investment in net working capital of $102,000 to be returned at the end of the project, and the equipment can be sold for $282,000 at the end of production. Fixed costs are $647,00 per year, and variable costs are $162 per unit. In addition to the contract, you feel your company can sell 10,200, 11,100, 13,200, and 10,500 additional units to companies in other countries over the next four years, respectively, at a price of $345. This price is fixed. The tax rate is 30 percent, and the required return is 12 percent. Additionally, the president of the company will undertake the project only if it has an NPV $100,000. What bid price should you set for the contract?

Reference no: EM13765691

Questions Cloud

Will you need articles of incorporation why or why not : Are you required to file a fictitious name application in your state? What types of business license are you required to apply for? Will you need Articles of Incorporation? Why or why not

Locations in the body of organisms : contrast somatic cells and gametes with respect to their ploidy (diploid v. haploid), number of chromosomes in humans, and locations in the body of organisms

What is the portfolio beta : You own a stock portfolio invested 20 percent in Stock Q, 20 percent in Stock R, 20 percent in Stock S, and 40 percent in Stock T. The betas for these four stocks are 1.53, 1.38, 0.9, and 1.01, respectively. What is the portfolio beta?

Biology is the study of life : 1. Biology is the study of life. What is life as described by a biologist?2. Explain the scientific method.3. Scientists describe evolution as the unifying concept of biology. Theodosius Dobzhansky said, "nothing in biology makes sense except in the ..

Depreciated on straight-line basis to zero salvage value : Your company has been approached to bid on a contract to sell 4,900 voice recognition (VR) computer keyboards a year for four years. Due to technological improvements, beyond that time they will be outdated and no sales will be possible. The equipmen..

Net profit margin-what is the firms return on equity : ABC earned a net profit margin of 5.8% last year and had an equity multiplier of 3.8. If its total assets are $102 million and its sales are 183 million, what is the firm's return on equity?

What types of cash flows are relevant to a new investment : What types of cash flows are relevant to a new investment and what analytical tool (s) can help make a better decision

Estimate of the companys cost of equity : Stock in Dragula Industries has a beta of 1.8. The market risk premium is 5 percent, and T-bills are currently yielding 4.80 percent. The company’s most recent dividend was $2.00 per share, and dividends are expected to grow at a 5.0 percent annual r..

What is the firms debt ratio : XYZ earned a net profit margin of 5.7% last year and had an equity multiplier of 3.3. If its total assets are $104 million and its sales are 159 million, what is the firm's debt ratio?

User Account

All Pages