Komoka Enterprises needs someone to supply it with 72,000 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 $950,000 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 $88,000 at the end of the five-year contract. Your fixed production costs will be $320,000 per year, and your variable production costs should be $15.50 per carton. You also need an initial net working capital of $150,000. If your tax rate is 35% and you require a 14% return on your investment, what bid price should you submit? Keep intermediate results to at least 5 decimal places, Minimum Bid price to 2 decimal places is $

Komoka Enterprises needs someone to supply it with 72,000 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 $950,000 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 $88,000 at the end of the five-year contract. Your fixed production costs will be $320,000 per year, and your variable production costs should be $15.50 per carton. You also need an initial net working capital of $150,000. If your tax rate is 35% and you require a 14% return on your investment, what bid price should you submit? Keep intermediate results to at least 5 decimal places, Minimum Bid price to 2 decimal places is $

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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ABC Corporation has hired you to evaluate a new FOUR year project for the firm. The project will require the purchase of a $803,600.00 work cell. Further, it will cost the firm $57,900.00 to get the work cell delivered and installed. The work cell will be straight-line depreciated to zero with a 20-year useful life. The project will require new employees to be trained at a cost of $65,200.00. The project will also use a piece of equipment the firm already owns. The equipment has been fully depreciated, but has a market value of $5,000.00. Finally, the firm will invest $10,700.00 in net working capital to ensure the project has sufficient resources to be successful. The project will generate annual sales of $919,000.00 with expenses estimated at 39.00% of sales. Net working capital will be held constant throughout the project. The tax rate is 40.00%. The work cell is estimated to have a market value of $450,000.00 at the end of the fourth year. The firm expects to reclaim 83.00% of the…
ABC Corporation has hired you to evaluate a new FOUR year project for the firm. The project will require the purchase of a $824,300.00 work cell. Further, it will cost the firm $55,600.00 to get the work cell delivered and installed. The work cell will be straight-line depreciated to zero with a 20-year useful life. The project will require new employees to be trained at a cost of $55,100.00. The project will also use a piece of equipment the firm already owns. The equipment has been fully depreciated, but has a market value of $6,200.00. Finally, the firm will invest $11,800.00 in net working capital to ensure the project has sufficient resources to be successful. The project will generate annual sales of $917,000.00 with expenses estimated at 40.00% of sales. Net working capital will be held constant throughout the project. The tax rate is 37.00%. The work cell is estimated to have a market value of $499,000.00 at the end of the fourth year. The firm expects to reclaim 82.00% of the…
Martin Enterprises needs someone to supply it with 117,000 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 $780,000 to install the equipment necessary to start production; you'll depreciate this cost straight-line to zero over the project's life. You estimate that, in five years, this equipment can be salvaged for $128,000. Your fixed production costs will be $405,000 per year, and your variable production costs should be $10.00 per carton. You also need an initial investment in net working capital of $67,000. If your tax rate is 23 percent and you require a return of 11 percent on your investment, what bid price should you submit? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Bid price
oJo sportswear company needs someone to supply it with 4,000 tons of cotton cloth per year to support its manufacturing needs over the next six years, and you’ve decided to bid on the contract. It will cost you $16 million to install the equipment necessary to start production; you’ll depreciate this cost straight-line to $4 million over the project’s life. The market value of the retired machine is $5 million. Your production costs will be $3.2 million per year. You also need an initial investment in net working capital of $1.5 million, which will be fully recovered at the end of the project. If your tax rate is 30 percent and you require a 10 percent return on your investment, what is the lowest bid price per ton you should submit? A. $2,017.49/ton B. $2,451.33/ton C. $1,951.33/ton D. $1,733.77/ton
ABC Corporation has hired you to evaluate a new FOUR year project for the firm. The project will require the purchase of a $823,400.00 work cell. Further, it will cost the firm $55,600.00 to get the work cell delivered and installed. The work cell will be straight-line depreciated to zero with a 20-year useful life. The project will require new employees to be trained at a cost of $68,600.00. The project will also use a piece of equipment the firm already owns. The equipment has been fully depreciated, but has a market value of $7,100.00. Finally, the firm will invest $11,400.00 in net working capital to ensure the project has sufficient resources to be successful. The project will generate annual sales of $905,000.00 with expenses estimated at 37.00% of sales. Net working capital will be held constant throughout the project. The tax rate is 38.00%. The work cell is estimated to have a market value of $493,000.00 at the end of the fourth year. The firm expects to reclaim 86.00% of the…
Martin Enterprises needs someone to supply it with 156,000 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 $1,960,000 to install the equipment necessary to start production, you'll depreciate this cost straight-line to zero over the project's life. You estimate that, in five years, this equipment can be salvaged for $166,000 Your fixed production costs will be $281,000 per year, and your variable production costs should be $1010 per carton. You also need an initial investment in net working capital of $146,000. If your tax rate is 21 percent and you require a return of 10 percent on your investment, what bid price per carton should you submit? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. Answer is complete but not entirely correct. Bid price 15 84
A company sells Gizmos to consumers at a price of $117 per unit. The cost to produce Gizmos is $27 per unit. The company will sell 15,000 Gizmos to consumers each year. The fixed costs incurred each year will be $190,000. There is an initial investment to produce the goods $3,400,000 which will be depreciated straight line over the 10-year life of the investment to a salvage value of $0. The opportunity cost of capital is 6% and the tax rate is 34%. What is the operating cash flow each year?
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Martin Enterprises needs someone to supply it with 130,000 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 $1,850,000 to install the equipment necessary to start production; you’ll depreciate this cost straight-line to zero over the project’s life. You estimate that, in five years, this equipment can be salvaged for $140,000. Your fixed production costs will be $625,000 per year, and your variable production costs should be $8.87 per carton. You also need an initial investment in net working capital of $295,000. If your tax rate is 21 percent and you require a 10 percent return on your investment, what bid price per carton should you submit?
After spending $9,600 on client-development, you have just been offered a big production contract by a new client. The contract will add $196,000 to your revenues for each of the next five years and it will cost you $96,000 per year to make the additional product. You will have to use some existing equipment and buy new equipment as well. The existing equipment is fully depreciated, but could be sold for $45,000 now. If you use it in the project, it will be worthless at the end of the project. You will buy new equipment valued at $29,000 and use the 5-year MACRS schedule to depreciate it. It will be worthless at the end of the project. Your current production manager earns $79,000 per year. Since she is busy with ongoing projects, you are planning to hire an assistant at$38,000 per year to help with the expansion. You will have to immediately increase your inventory from $20,000 to $30,000. It will return to $20,000 at the end of the project is 21% and your discount rate is 14.7%. What…
need answer in step by step
Hurzdan, Inc., is considering the purchase of a $410,000 computer with an economic life of five years. The computer will be fully depreciated over five years using the straight-line method. The market value of the computer will be $74,000 in five years. The computer will replace five office employees whose combined annual salaries are $119,000. The machine will also immediately lower the firm’s required net working capital by $94,000. This amount of net working capital will need to be replaced once the machine is sold. The corporate tax rate is 24 percent. The appropriate discount rate is 14 percent. Calculate the NPV of this project.

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