Guthrie Enterprises needs someone to supply it with 140,000 cartons of machine screws per year to support its manufacturing needs over the next five years, and you've decided to bid on the contract. It will cost you $1,800,000 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 five years this equipment can be salvaged for $150,000. Your fixed production costs will be $265,000 per year, and your variable production costs should be $8.50 per carton. You also need an initial investment in net working capital of $130,000. If your tax rate is 35 percent and you require a 14 percent return on your investment, solve the following questions:

(a) Assume that the price per carton is $16 and find the project NPV. Determine the number of cartons you can sell and still break even. Crtically discuss on the level of costs.

(b) Solve the previous problem again with the price still at $16 but find the quantity of cartons per year that you can supply and still break even.

(c) Repeat (b) with a price of NPV 16 and a quantity of 140,000 cartons per year, and compute the highest level of fixed costs you could afford and still break even.