Reference no: EM131804703

Question - Abitibi Pulp Firm is considering a new product line for its existing table business. It has developed a new type of computer table that will protect the computer during an earthquake. It would like you to analyze the feasibility of the venture and suggests a break-even bid price. It provides you with the following details:

• Marketing analysis indicates technology companies in Silicon Valley will buy 250 tables each year for four years.
• The consultant who did the marketing research charged a fee of $15,000.
• The firm estimates that the variable cost per table is $100. For this project the firm would require extra factory space at a cost of $25,000 per year, overhead costs such as heating and lighting would amount to $4,000 per year and wages and salaries would total $75,000 per year.
• The machinery required for the new product line would cost $200,000, and have a salvage value of $50,000 at the end of 4 years. The machinery belongs to CCA class 16 and has a 15 percent declining balance rate.
• Additional working capital of $150,000 would be required to get the project started.
• The corporate tax rate is 40 percent and the required rate of return is 12 percent.

What price should Abitibi charge for each table?