Additional Facts Regarding Bidder 2:

Osinloye and Tang Inc. is a NYC-based company. As a result, your income from this project will be taxed at a combined 30% (20% Federal, 10% State/City)

While this high tax rate will likely put you at a disadvantage, you have a possible ace up your sleeve. You have confidence that by using good-old-yankee-ingenuity and conducting certain innovative maintenance procedures on the windmills each year beginning in Year 6, you can extend the useful life of the windmills by at least 1 year, and maybe 2 years. The cost of such maintenance procedures is $10,000 per year, per windmill. You believe that the use of your technology to extend the life of the equipment, and the wording in Wingates bid directions that states approximate 10 year contract, opens the door for you to bid for a term a bit longer than 10 years.

One other possible advantage you have: because of your NYC location, you are well connected to financial institutions, and one of those relationships has indicated that it will provide $3.2 million of debt financing at 5.5% interest rate. The additional $1.0 million investment will need to come from your equity, which has a cost of 12%

Under current tax law, the full amount of the windmill investment ($4.2 million) is tax deductible in the year it is acquired. However, it is considered quite likely that the new administration will push for a new tax bill, in which it is expected that for tax purposes the deduction for capital investments (such as this windmill project) will be spread evenly over the expected life of the equipment (10 years in this case).

The Bidder 2 executive team must develop a recommended bid to be presented to the Wingate selection committee.