Question
he Army seeks bids on Multiple Use Digitizing Devices (MUDDs). They would like to purchase 4 units per year for 3 years. Manufacturing these units
he Army seeks bids on Multiple Use Digitizing Devices (MUDDs). They would like to purchase 4 units per year for 3 years. Manufacturing these units require variable costs are $10,000 per MUDD. Rent is $12,000 per year.The project requires $50,000 in equipment which you can sell for $10,000 after 3 years. You will depreciate the machine straight-line to zero over 3 years. Making MUDDs will require a $10,000 increase in NWC, which will be offset at the end of the project.Tax rate is 34%, opportunity cost of capital is 15%. What is the minimum levels of OCF to achieve financial breakeven?
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