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Consider a project to supply 8 2 million postage stamps to the U . S . Postal Service each year for the next five years.
Consider a project to supply million postage stamps to the US Postal Service each year for the next five years. You have an idle parcel of land available that cost $ five years ago; if the land were sold today, it would net you $ aftertax. You estimate the land can be sold for $ after taxes in five years. You will need to install $ in new manufacturing plant and equipment to actually produce the stamps; this plant and equipment will be depreciated straightline to zero over the project's fiveyear life. No need to consider amortization for the land. The equipment can be sold for $ at the end of the project. You will also need $ in initial net working capital for the project, and an additional investment of $ in every year thereafter. All net working capital will be recovered when the project ends. Your production costs are cents per stamp, and you have fixed costs of $ per year. Your tax rate is percent and your required return on this project is percent. What bid price per stamp should you submit?
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