Komoka Enterprises needs someone to supply it with 140,000 cartons of machine screws per year to support its manufacturing needs over the next five years, and you’ve decided to bid on the contract. It will cost you $920,000 to install the equipment necessary to start production. The equipment will be depreciated at 30% (Class 10), and you estimate that it can be salvaged for $95,000 at the end of the five-year contract. Your fixed production costs will be $350,000 per year, and your variable production costs should be $15.10 per carton. You also need an initial net working capital of $125,000 . If your tax rate is 35% and you require a 14% return on your investment, what bid price
Komoka Enterprises needs someone to supply it with 140,000 cartons of machine screws per year to support its manufacturing needs over the next five years, and you’ve decided to bid on the contract. It will cost you $920,000 to install the equipment necessary to start production. The equipment will be depreciated at 30% (Class 10), and you estimate that it can be salvaged for $95,000 at the end of the five-year contract. Your fixed production costs will be $350,000 per year, and your variable production costs should be $15.10 per carton. You also need an initial net working capital of $125,000 . If your tax rate is 35% and you require a 14% return on your investment, what bid price
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 18P
Related questions
Question
Komoka Enterprises needs someone to supply it with 140,000 cartons of machine screws per year to support its manufacturing needs over the next five years, and you’ve decided to bid on the contract. It will cost you $920,000 to install the equipment necessary to start production. The equipment will be depreciated at 30% (Class 10), and you estimate that it can be salvaged for $95,000 at the end of the five-year contract. Your fixed production costs will be $350,000 per year, and your variable production costs should be $15.10 per carton. You also need an initial net working capital of $125,000 . If your tax rate is 35% and you require a 14% return on your investment, what bid price
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 6 steps with 5 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Fundamentals Of Financial Management, Concise Edi…
Finance
ISBN:
9781337902571
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Fundamentals Of Financial Management, Concise Edi…
Finance
ISBN:
9781337902571
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning