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Bebe Enterprise needs someone to supply it with 100,000 pcs of generators per year to support its manufacturing needs over the next 5 years, and

Bebe Enterprise needs someone to supply it with 100,000 pcs of generators per year to support its manufacturing needs over the next 5 years, and you've decided to bid on the contract. It will cost you $600,000 to install the equipment necessary to start production; you'll depreciate this cost straight-line to zero over the project's life. You estimate that in 5 years, this equipment can be salvaged for $50,000 (before tax). Your fixed production costs will be $500,000 per year, and your variable production costs should be $30 per pcs. You also need an initial investment in net working capital of $100,000. If your tax rate is 30% and you require a 12% return on your investment, what is our proper bid price per pcs?

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