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PLEASE ANSWER IN FULL QUESTION AND SHOW ALL WORK, I WILL GIVE THUMBS UP! Union America Corporation (UAC) is planning to bid on a project
PLEASE ANSWER IN FULL QUESTION AND SHOW ALL WORK, I WILL GIVE THUMBS UP!
Union America Corporation (UAC) is planning to bid on a project to supply 150,000 cartons of machine screws per year for 5 years to the US Navy. In order to produce the machine screws UAC would have to buy some new equipment. The new equipment would cost $780,000 to purchase and install. This equipment would be depreciated straight line to zero over the five years of the contract. However, UAC thinks it could sell the equipment for $50,000 at the end of year 5 . Fixed production costs will be $240,000 per year, and variable costs of production are $8.50 per carton. UAC would also need an initial investment in Net Working Capital of $75,000 at the beginning of this project. UAC has a cost of capital of 16% and a tax rate of 35%. What should be the bid price per carton on this projectStep by Step Solution
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