What bid price should you submit on the contract

Assignment Help Financial Management

Reference no: EM13942979

Consider a project to supply 100 million postage stamps per year to the U.S. Postal Service for the next five years. You have an idle parcel of land available that cost $1,900,000 five years ago; if the land were sold today, it would net you $2,100,000 aftertax. The land can be sold for $2,300,000 after taxes in five years. You will need to install $5.4 million in new manufacturing plant and equipment to actually produce the stamps; this plant and equipment will be depreciated straight-line to zero over the project’s five-year life. The equipment can be sold for $500,000 at the end of the project. You will also need $600,000 in initial net working capital for the project, and an additional investment of $50,000 in every year thereafter. Your production costs are 0.5 cents per stamp, and you have fixed costs of $1,050,000 per year. If your tax rate is 34 percent and your required return on this project is 12 percent, what bid price should you submit on the contract? (Do not round intermediate calculations and round your final answer to 5 decimal places. (e.g., 32.16161))

Reference no: EM13942979

Questions Cloud

With a quoted interest rate : With a quoted interest rate of 5% and a 10% compensating balance, what is the effective rate of interest (use $200,000 loans proceeds amount) 2. With the average accounts receivable of $5 million and credit sales of $24 million, you factor receivable..

Equally weighted portfolio of these three stocks : Consider the following information: Rate of Return if State Occurs State of Probability of Economy State of Economy Stock A Stock B Stock C Boom 0.62 0.09 0.17 0.35 Bust 0.38 0.20 0.10 − 0.06 a. What is the expected return on an equally weighted port..

Hedge through covered interest arbitrage : You are expecting to receive 10M Euros 3-months from now. The interest rates are 3% in the US and 5% in Germany. Current spot exchange rate: $1.20/Euro and 3-month Forward rates: $1.15/Euro. How much $ will you have 3-months from now if you hedge thr..

Which is best futures contract to hedge accounts payable : You would like to hedge your accounts payable due one-year from now of Indian Rupees (IR) 10 million in the Futures market. But there are no Futures contract available on Indian Rupees. However, Futures contract on Singapore dollar (S$) and Hong Kong..

What bid price should you submit on the contract : Consider a project to supply 100 million postage stamps per year to the U.S. Postal Service for the next five years. You have an idle parcel of land available that cost $1,900,000 five years ago; if the land were sold today, it would net you $2,100,0..

Would you go short or long on the futures contract : Your stock portfolio is worth $10M with a beta of 1.1. The spot price of S&P 500 is 950. Each S&P 500 contract is for $250 per index points. To protect against the market decline. How many futures contract should you need? Would you go short or long ..

Calculate net present value of loan including flotation cost : Daniel Kaffe, CFO of Kendrick Enterprises, is evaluating a 10-year, 5.90 percent loan with gross proceeds of $5,970,000. The interest payments on the loan will be made annually. Calculate the net present value of the loan excluding flotation costs. C..

How a riskless arbitrage is possible : Silver price today, December 7th, 2015 is $14.00/ounce. Each Futures contract has 5,000 ounces. Today’s interest rate for one-year rc = 5.00%. a. What is the Fair price of one Dec 7th 2016 silver futures contract? b. If the same silver contract is of..

New project available that requires an initial investment : Stackhouse Industries has a new project available that requires an initial investment of $5.9 million. The project will provide unlevered cash flows of $815,000 per year for the next 20 years. The company will finance the project with a debt-to-value..

User Account

All Pages