Question
You are the CFO of ViNdia, a maker of semi conductors for gaming consoles and the automotive market.You have the opportunity You are considering bidding
You are the CFO of ViNdia, a maker of semi conductors for gaming consoles and the automotive market.You have the opportunity You are considering bidding on a project to supply 5 million specialized GPUs per year to Fjord Motor for the next five years. In order to fill this order, you will have to build a new plant. You have an idle parcel of land available that you purchased for $1,000,000 five years ago.If the land were sold today
you would receive $1,150,000. You will need to invest $2,100,000 in a new manufacturing plant and equipment that will be depreciated on a straight
line basis over its useful life of 7 years.You estimate that the equipment plant and land
will be worth $3,000,000 at the end of five years. You will need to invest $600,000 in initial working capital and an additional
$50,000 each year to support the project. You estimate the variable cost will
be $2.50 per unit, and fixed costs will be $800,000 per year. Assuming you have a 12.5 % cost of capital and a 21% tax rate, what
is the minimum bid price per stamp you should submit?
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