Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Please explain how to get the middle number and if I am correct. Thanks. The technique for calculating problems. Answer the following questions using the
Please explain how to get the middle number and if I am correct. Thanks.
The technique for calculating problems. Answer the following questions using the same technique as setting a bid price; that is, set the project NPV to zero and solve for the variable in question. Guthrie Enterprises needs someone to supply it with 152,000 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 $1,920,000 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 $162,000. Your fixed production costs will be $277,000 per year, and your variable production costs should be $10.60 per carton. You also need an initial investment in net working capital of $142,000 The tax rate is 22 percent and you require a return of 12 percent on your investment. Assume that the price per carton is $17.20. bid price ca n be extended to many other types of a 10 points eBook C Print a. Calculate the project NPV. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the minimum number of cartons per year that can be supplied and still break even? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) c. What is the highest fixed costs that could be incurred and still break even? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g. 32.16.) NPV 436,681.18 Quantity of cartons Fixed costs 432,307.20 00Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started