17. 20.

Calculating a bid price [LO 10.3] Cocklebiddy Enterprises needs someone to supply it with 125 000 cartons of machine screws per year to support its manufacturing needs over the next five years and you have decided to bid on the contract. It will cost you $910 000 to install the equipment necessary to start production; you will depreciate this cost straight-line to zero over the project’s life. You estimate that, in five years, this equipment can be salvaged for $85 000. Your fixed production costs will be $485 000 per year and your variable production costs should be $17.35 per carton. You also need an initial investment in net working capital of $90 000. If your tax rate is 30 per cent and you require a return of 12 per cent on your investment, what bid price should you submit?