What bid price should you submit

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Reference no: EM131450283

Apex Manufacturing needs someone to supply it with 183,000 cartons of machine screws per year to support its manufacturing needs over the next 5 years, and you've decided to bid on the contract. It will cost you $960,000 to install the equipment (equivalent to your initial outlay) necessary to start production; you'll depreciate this cost straight-line to 0 over the project's life of 5 years. You estimate that in 5 years, this equipment can be salvaged for $50,000. Your fixed production costs will be $295,000 per year, and your variable production costs should be $10.25 per carton. You also need an initial investment in net working capital of $72,000. If your tax rate is 35% and you require a 13% return on your investment, what bid price should you submit?

Reference no: EM131450283

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