Calculating a Bid Price Consider a project to supply 100 million postage stamps per year to the Royal Mail for the next 5 years. You have an idle parcel of land available that cost £2,400,000 5 years ago; if the land were sold today, it would net you £2,700,000 after tax. In 5 years the land can be sold for £3,200,000 after tax. You will need to install £4.1 million in new manufacturing plant and equipment to actually produce the stamps: this plant and equipment will be depreciated straight-line to zero over the project’s five-year life. The equipment can be sold for

£540,000 at the end of the project. You will also need

£600,000 in initial net working capital for the project, and an additional investment of £50,000 in every year thereafter. Your production costs are