Alexander Driverman, Director of ticket sales for Buslink, recently put out an RFQ for the supply of new ticketing machines for Skybus. Buslink needs to purchase 110 new ticketing machines each year for the next five years. In order to bid on the project, you will need to acquire $760,000 of new, specialized metal forming equipment. This equipment is a class 8 asset with a 20% CCA rate, computed using the Accelerated Investment Incentive Method. You believe that you will be able to sell the new equipment for $210,000 at the end of the project. It will cost you $2,600 in labour and supplies to produce each ticketing machine and your fixed overhead will cost $110,000 per year. Net working capital will rise by $50,000 initially but this will all be recovered at the end of the project. Your firms tax rate is 20% and the firms cost of capital is 20%. Accelerated investment incentive applies. How much should we bid to produce each new ticketing machine?

Answer format: Cash inflows are positive (no + sign). Cash outflows are negative (use - sign).

e.g. Positive cash inflow: +$X,XXX.XX = XXXX or +$1,234.56 = 1235 (no + sign, no commas, round to nearest whole number)

e.g. Negative cash outflow: -$X,XXX.XX = -XXXX or -$1,234.56 = -1235 (use - sign, no commas, round to nearest whole number)

The correct value to use for Step #1 - the PV of the initial cost, is:

Answer

The correct value to use for Step #2 - the PV of the incremental, after-tax costs & revenues, is:

Answer

The correct value to use for Step #3 - the PV of the tax shield from CCA, is:

Answer

The correct value to use for Step #4 - the PV of salvage, is:

Answer

The correct value to use for Step #5 - the PV of the tax shield lost due to salvage, is:

Answer

The correct value to use for Step #6 - the PV of the change in net working capital, is:

Answer

The NPV of the total cost stream for the new ticket machines is:

Answer

The correct bid price we should submit is: