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(10 marks) The City of Calgary's Public Transit Services needs someone to supply it with 7 new articulated buses per year for the next 5
(10 marks) The City of Calgary's Public Transit Services needs someone to supply it with 7 new articulated buses per year for the next 5 years and you've decided to bid on the contract. It will cost you $4,000,000 to install the equipment necessary to start production. The equipment will be depreciated at 30 percent (class 10 ), and you estimate that it can be salvaged for $900,000 at the end of the fiveyear contract. Your fixed production costs will be $350,000 per year, and your variable production costs should be $200,000 per bus. You also need net working capital of $375,000 per year throughout the life of the project. If your tax rate is 34 percent and you require a 15 percent return on your investment, what should you bid per bus
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