What per-unit price should better-rock bid at a minimum

Assignment Help Financial Management

Reference no: EM131618745

Better-Rock & Co. is bidding on a contract to supply a special type of geophone used in oil exploration. The contract calls for the supply of 80,000 units per year for 3 years. The equipment required to produce these geophones has an estimated installed cost of $4.2 million. An estimated $200,000 will need to be invested in net working capital (to be recovered at project end). The equipment will be depreciated fully on a straight-line basis on a 6-year schedule, and sold at the end of 3 years for an expected $2.2 million.

Annual fixed operating costs (other than depreciation) are expected to be $320,000. Variable operating costs should amount to 35% of sales revenue. Better-Rock & Co. has a required return of 10% on this project. The company faces a marginal tax rate of 35%. What per-unit price should Better-Rock bid at a minimum?

Reference no: EM131618745

Questions Cloud

Define each of the eight performance measures : Define each of the eight performance measures, list how they determine company performance; how each relate to a company, along with an example for each:

Estimate the cost of capital : Messan Co. (a U.S. firm) borrows U.S. funds at an interest rate of 10 percent per year. Its beta is 1.0. Estimate the cost of capital to Messan Co.

Calculate the irr assuming a cost of capital : What is the NPV of above project if the initial investment was $35,000? Calculate the IRR assuming a cost of capital of 11%.

What is the tax treatment of the distribution to barney : What is the tax treatment of the distribution to Barney and what is his tax basis in Elk stock after the distribution?

What per-unit price should better-rock bid at a minimum : Better-Rock & Co. is bidding on a contract to supply a special type of geophone used in oil exploration. What per-unit price should Better-Rock bid at minimum.

What are the total revenues for firm : Suppose that Firm A is located at Node A, and buys 10 MW of power from Firm B, who is located at Node B. What are the total revenues for Firm B?

Calculate the capacity payment : Calculate the capacity payment, in $ per MW per day, needed for the plant to recover all of its capital and operational costs.

Ratio analysis which examines venture performance : Which of the following is NOT used in ratio analysis which examines a venture’s performance? Is there a limit to the debt ratio's value?

The journal entry to replenish the fund would be : DogCo has a petty cash fund of? $275. The journal entry to replenish the fund would be? to:

User Account

All Pages