Romo Enterprises needs someone to supply it with 122,000 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 $890,000 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 $72,000. Your fixed production costs will be $327,000 per year, and your variable production costs should be $10.50 per carton. You also need an initial investment in net working capital of $77,000. If your tax rate is 34 percent and you require a return of 10 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
Romo Enterprises needs someone to supply it with 122,000 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 $890,000 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 $72,000. Your fixed production costs will be $327,000 per year, and your variable production costs should be $10.50 per carton. You also need an initial investment in net working capital of $77,000. If your tax rate is 34 percent and you require a return of 10 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
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
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Transcribed Image Text:Romo Enterprises needs someone to supply it with 122,000 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 $890,000 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 $72,000. Your fixed
production costs will be $327,000 per year, and your variable production costs should
be $10.50 per carton. You also need an initial investment in net working capital of
$77,000. If your tax rate is 34 percent and you require a return of 10 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
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