Calculation of a bid price (OA3) Alson Enterprises needs someone to supply 185,000 boxes of machine screws per year to support its manufacturing needs for the next five years. You have decided to bid on the contract. Installing the equipment needed to start production will cost you $940,000. You will depreciate this cost on a straight-line basis to zero over the life of the project. He estimates that in five years, this equipment may have a salvage value of $70,000. Your fixed production costs will be $305,000 per year, and your variable production costs should be $9.25 per box. You also need an initial investment in net working capital of $75,000. If the tax rate is 35% and you require a 12% return on your investment, what bid price would you submit?

ADD CASH FLOW TABLE