Initial investment in net working capital

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Alson Enterprises needs someone to supply it with 168,000 cartons of machine screws per year to support its manufacturing needs over the next 4 years, and you've decided to bid on the contract. It will cost you $873,600 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 4 years, this equipment can be salvaged for $56,000. Your fixed production costs will be $268,800 per year, and your variable production costs should be $9.52 per carton. You also need an initial investment in net working capital of $84,000, all of which will be recovered at the end of the project. If your tax rate is 33 percent and you require a 17 percent return on your investment, you should submit a bid price per unit of $____?

Reference no: EM13795308

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