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

Want to see the full answer?

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.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

You are looking to lease a 2019 Subaru Forester. You have found a 36 - month closed end lease on a Forester with an MSRP of $25, 270 and a lease end purchase option of $15,667 (residual value). To get the lease you have to pay a fee of $1,765 due at signing, and the monthly payment was calculated to be $ 265. A) What is the nominal rate of return the dealership is earning on the lease? (Hint: think of the cash flows from the dealerships prospective) B) What would the lease payment be if the dealership wanted a nominal 6% compounded monthly on the lease?

What should business people learn about the problem started with Sears and organizational consequences?How the traditional retail businesses face significant challenges in remaining competitive in the digital age? What is the broad exploration of retail industry challenges without assuming specific causes or outcomes, making them suitable for research and why?

What are Biblical principles researchers can follow to mitigate Unintended errors in research?How a Christian conduct during a research proposal and study can be a witnessof the Gospel to others.