Alson Enterprises needs someone to supply it with 185,000 cartons of machine screw per year to support its manufacturing needs over the next five years, and you have decided to bid on the contract. It will cost you $940,000 to install the equipment necessary to start production; you will depreciate this cost straight-line to zero over the project’s life. You estimate that in five years this equipment can be salvaged for $70,000. Your fixed cost production costs will be $305,000 per year, and your variable production costs should be $9.25 per carton. You also need an initial investment in net working capital of $75,000. If your tax rate is 35% and you require a 12% return on your investment, what bid price should submit?
Alson Enterprises needs someone to supply it with 185,000 cartons of machine screw per year to support its manufacturing needs over the next five years, and you have decided to bid on the contract. It will cost you $940,000 to install the equipment necessary to start production; you will
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