Adequate information: Number of units sold for Year 1 = 4,000 Number of units sold for Year 2 = 12,000 Number of units sold for Year 3 = 14,000 Number of units sold for Year 4 = 7,000 Price per unit = $135 Variable costs per unit (V) = $43 Fixed cost (FC) = $775,000 Pre-tax salvage value = $250,000 Cost of equipment = $3,600,000 Useful life of the equipment = 4 years Net working capital (NWC) = $125,000 Quantity (Q) = 18,000 units Tax rate (T) = 24% or 0.24 Required return (r) = 13% or 0.13 To compute: Bid price of the contract. Introduction: Net present value is defined as the summation of the present value of cash inflows in each period minus the summation of the present value of cash outflow . Bid price refers to the price which the investors are willing to pay for the purchase of security, commodity, or contract.

Question

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Answer 1

Question

Chapter 6, Problem 36QAP

Summary Introduction

Adequate information:

Number of units sold for Year 1 = 4,000

Number of units sold for Year 2 = 12,000

Number of units sold for Year 3 = 14,000

Number of units sold for Year 4 = 7,000

Price per unit = $135

Variable costs per unit (V) = $43

Fixed cost (FC) = $775,000

Pre-tax salvage value = $250,000

Cost of equipment = $3,600,000

Useful life of the equipment = 4 years

Net working capital (NWC) = $125,000

Quantity (Q) = 18,000 units

Tax rate (T) = 24% or 0.24

Required return (r) = 13% or 0.13

To compute: Bid price of the contract.

Introduction: Net present value is defined as the summation of the present value of cash inflows in each period minus the summation of the present value of cash outflow.

Bid price refers to the price which the investors are willing to pay for the purchase of security, commodity, or contract.

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Answer 2

Question

Chapter 6, Problem 36QAP

Summary Introduction

Adequate information:

Number of units sold for Year 1 = 4,000

Number of units sold for Year 2 = 12,000

Number of units sold for Year 3 = 14,000

Number of units sold for Year 4 = 7,000

Price per unit = $135

Variable costs per unit (V) = $43

Fixed cost (FC) = $775,000

Pre-tax salvage value = $250,000

Cost of equipment = $3,600,000

Useful life of the equipment = 4 years

Net working capital (NWC) = $125,000

Quantity (Q) = 18,000 units

Tax rate (T) = 24% or 0.24

Required return (r) = 13% or 0.13

To compute: Bid price of the contract.

Introduction: Net present value is defined as the summation of the present value of cash inflows in each period minus the summation of the present value of cash outflow.

Bid price refers to the price which the investors are willing to pay for the purchase of security, commodity, or contract.

Expert Solution & Answer

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Answer 3

Question

Chapter 6, Problem 36QAP

Summary Introduction

Adequate information:

Number of units sold for Year 1 = 4,000

Number of units sold for Year 2 = 12,000

Number of units sold for Year 3 = 14,000

Number of units sold for Year 4 = 7,000

Price per unit = $135

Variable costs per unit (V) = $43

Fixed cost (FC) = $775,000

Pre-tax salvage value = $250,000

Cost of equipment = $3,600,000

Useful life of the equipment = 4 years

Net working capital (NWC) = $125,000

Quantity (Q) = 18,000 units

Tax rate (T) = 24% or 0.24

Required return (r) = 13% or 0.13

To compute: Bid price of the contract.

Introduction: Net present value is defined as the summation of the present value of cash inflows in each period minus the summation of the present value of cash outflow.

Bid price refers to the price which the investors are willing to pay for the purchase of security, commodity, or contract.

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Answer 4

Question

Chapter 6, Problem 36QAP

Summary Introduction

Adequate information:

Number of units sold for Year 1 = 4,000

Number of units sold for Year 2 = 12,000

Number of units sold for Year 3 = 14,000

Number of units sold for Year 4 = 7,000

Price per unit = $135

Variable costs per unit (V) = $43

Fixed cost (FC) = $775,000

Pre-tax salvage value = $250,000

Cost of equipment = $3,600,000

Useful life of the equipment = 4 years

Net working capital (NWC) = $125,000

Quantity (Q) = 18,000 units

Tax rate (T) = 24% or 0.24

Required return (r) = 13% or 0.13

To compute: Bid price of the contract.

Introduction: Net present value is defined as the summation of the present value of cash inflows in each period minus the summation of the present value of cash outflow.

Bid price refers to the price which the investors are willing to pay for the purchase of security, commodity, or contract.

Expert Solution & Answer

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Answer 5

Chapter 6, Problem 36QAP

Summary Introduction

Adequate information:

Number of units sold for Year 1 = 4,000

Number of units sold for Year 2 = 12,000

Number of units sold for Year 3 = 14,000

Number of units sold for Year 4 = 7,000

Price per unit = $135

Variable costs per unit (V) = $43

Fixed cost (FC) = $775,000

Pre-tax salvage value = $250,000

Cost of equipment = $3,600,000

Useful life of the equipment = 4 years

Net working capital (NWC) = $125,000

Quantity (Q) = 18,000 units

Tax rate (T) = 24% or 0.24

Required return (r) = 13% or 0.13

To compute: Bid price of the contract.

Introduction: Net present value is defined as the summation of the present value of cash inflows in each period minus the summation of the present value of cash outflow.

Bid price refers to the price which the investors are willing to pay for the purchase of security, commodity, or contract.

Answer 6

Chapter 6, Problem 36QAP

Summary Introduction

Adequate information:

Number of units sold for Year 1 = 4,000

Number of units sold for Year 2 = 12,000

Number of units sold for Year 3 = 14,000

Number of units sold for Year 4 = 7,000

Price per unit = $135

Variable costs per unit (V) = $43

Fixed cost (FC) = $775,000

Pre-tax salvage value = $250,000

Cost of equipment = $3,600,000

Useful life of the equipment = 4 years

Net working capital (NWC) = $125,000

Quantity (Q) = 18,000 units

Tax rate (T) = 24% or 0.24

Required return (r) = 13% or 0.13

To compute: Bid price of the contract.

Introduction: Net present value is defined as the summation of the present value of cash inflows in each period minus the summation of the present value of cash outflow.

Bid price refers to the price which the investors are willing to pay for the purchase of security, commodity, or contract.

Answer 7

Chapter 6, Problem 36QAP

Summary Introduction

Adequate information:

Number of units sold for Year 1 = 4,000

Number of units sold for Year 2 = 12,000

Number of units sold for Year 3 = 14,000

Number of units sold for Year 4 = 7,000

Price per unit = $135

Variable costs per unit (V) = $43

Fixed cost (FC) = $775,000

Pre-tax salvage value = $250,000

Cost of equipment = $3,600,000

Useful life of the equipment = 4 years

Net working capital (NWC) = $125,000

Quantity (Q) = 18,000 units

Tax rate (T) = 24% or 0.24

Required return (r) = 13% or 0.13

To compute: Bid price of the contract.

Introduction: Net present value is defined as the summation of the present value of cash inflows in each period minus the summation of the present value of cash outflow.

Bid price refers to the price which the investors are willing to pay for the purchase of security, commodity, or contract.

Answer 8

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Answer 9

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Answer 10

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Answer 11

Ch. 6 - Opportunity Cost In the context of capital...Ch. 6 - Prob. 2CQ Ch. 6 - Incremental Cash Flows Your company currently...Ch. 6 - Depreciation Given the choice, would a firm prefer...Ch. 6 - Prob. 5CQ Ch. 6 - Prob. 6CQ Ch. 6 - Equivalent Annual Cost When is EAC analysis...Ch. 6 - Prob. 8CQ Ch. 6 - Capital Budgeting Considerations A major college...Ch. 6 - To answer the next three questions, refer to the...

Solution Summary: The author explains the calculation of the net present value of cash inflows in each period minus cash outflow.

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