Martin Enterprises needs someone to supply it with 156,000 cartons of machine screws per year to support its manufacturing needsover 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 tostart production, you'll depreciate this cost straight-line to zero over the project's life. You estimate that, in five years, this equipmentcan 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 areturn 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 price15 84

Npv is also known as Net present Value. It is a capital budgeting techniques which helps in decision…

Answered: Martin Enterprises needs someone to…

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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Company XYZ is evaluating a project that generates revenue of $200,000 per year for 10 years. The variable costs are 60% of the revenue. Fixed costs are $15,000. The equipment cost is $150,000. There net working capital will increase by $10.000 which will be reset at the end of the project. The equipment will be depreciated under straight-line method. The equipment can be sold for $25,000 at the end of the project. The risk of the project is above the average risk. The company pays tax at 38%. The assets of the company financed by equity only. The company expected to pay $2.00 of dividend per share which grows at the rate of 4% per year forever. The current price of the stock is $28. The company makes below adjustments to adjust the risk of the projects: Rate of 2.5% more is required by the high risky projects. Low risky project should be evaluated at the rate less than the cost of capital. The required rate of return for such projects will be reduced by 1.5%. What is the profitability…
The equivalent annual worth of the process currently used in manufacturing motion controllers is AW = $-62,000 per year. A replacement process is under consideration that will have a first cost of $64,000 and an operating cost of $38,000 per year for the next 3 years. Three different engineers have given their opinion about what the salvage value of the new process will be 3 years from now as follows: $10,000, $13,000, and $18,000. Is the decision to replace the process sensitive to the salvage value estimates at the company’s MARR of 15% per year?
Martin Enterprises needs someone to supply it with 141,000 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 $1,810,000 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 $151,000. Your fixed production costs will be $266,000 per year, and your variable production costs should be $8.60 per carton. You also need an initial investment in net working capital of $131,000. If your tax rate is 21 percent and you require a return of 13 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.
Heer Enterprises needs someone to supply it with 160,000 cartons of machine screws per year to support its manufacturing needs over the next three years, and you've decided to bid on the contract. It will cost you $840,000 to install the equipment necessary to start production and you estimate that it can be salvaged for $160,000 at the end of the three-year contract. Your fixed production costs will be $290,000 per year, and your variable production costs should be $8.50 per carton. If you require a 12 percent return on your investment, what is the minimum bid price you should submit?
Dog Up! Franks is looking at a new sausage system with an installed cost of $500,000. This cost will be depreciated straight-line to zero over the project's five-year life, at the end of which the sausage system can be scrapped for $74,000. The sausage system will save the firm $180,000 per year in pretax operating costs and the system requires an initial investment in net working capital of $33,000. If the tax rate is 24 percent and the discount rate is 9 percent, what is the NPV of this project? 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. S 119,822.41 NPV
Dog Up! Franks is looking at a new sausage system with an installed cost of $440,000. This cost will be depreciated straight-line to zero over the project's five-year life, at the end of which the sausage system can be scrapped for $62,000. The sausage system will save the firm $250,000 per year in pretax operating costs, and the system requires an initial investment in net working capital of $21,000. If the tax rate is 34 percent and the discount rate is 10 percent, what is the NPV of this project? (Do not round intermediate calculations and round your final answer to 2 decimal places, e.g., 32.16.) NPV eBook & Resources eBook: 10.6. Some Special Cases of Discounted Cash Flow Analysis Check my work
We assume that the company that you selected is considering a new project. The project has 8 years’ life. This project requires an initial investment of $580 million to purchase equipment, and $30 million for shipping & installation fees. The fixed assets fall in the 7-year MACRS class. The salvage value of the fixed assets is 10% of the purchase price (including the shipping & installation fee). The number of units of the new product expected to be sold in the first year is 2,660,000 and the expected annual growth rate is 10.5%. The sales price is $280 per unit and the variable cost is $225 per unit in the first year, but they should be adjusted accordingly based on the estimated annualized inflation rate of 3.0%. The required net operating working capital (NOWC) is 11.8% of sales with the corporate tax rate of 21%. The project is assumed to have the same risk as the corporation, so 5.35% is the discount rate for this hypothetical project. Estimate annual cash flows for the 8…
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We assume that the company that you selected is considering a new project. The project has 8 years' life. This project requires an initial investment of $580 million to purchase equipment, and $30 million for shipping & installation fees. The fixed assets fall in the 7-year MACRS class. The salvage value of the fixed assets is 10% of the purchase price (including the shipping & installation fee). The number of units of the new product expected to be sold in the first year is 2,660,000 and the expected annual growth rate is 10.5%. The sales price is $280 per unit and the variable cost is $225 per unit in the first year, but they should be adjusted accordingly based on the estimated annualized inflation rate of 3.0%. The required net operating working capital (NOWC) is 11.8% of sales with the corporate tax rate of 21%. The project is assumed to have the same risk as the corporation, so 5.35% is the discount rate for this hypothetical project. Estimate annual cash flows for the 8 years.…
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Martin Enterprises needs someone to supply it with 175,000 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 $2,300,000 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 $185,000. Your fixed production costs will be $670,000 per year, and your variable production costs should be $9.23 per carton. You also need an initial investment in net working capital of $340,000. If your tax rate is 25 percent and you require a 11 percent return on your investment, what bid price per carton should you submit? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Bid price

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