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Please show all of your work and please do on excel The Big Salt Company is considering making a bid to supply the highway department
Please show all of your work and please do on excel
The Big Salt Company is considering making a bid to supply the highway department with rock salt during the winter. The contract will guarantee a minimum of 25,000 tons in each year, but the actual quantity may be above that amount if conditions warrant. Management believes the act quantity will average 40,000 tons per year. The firm will need an initial $1,500,000 investment in processing equipment to get the project started. The contract will last for 5 years and is not expected to be renewed. The accounting department has estimated that annual fixed costs will S500,000 and that variable costs should be about $94 per ton of the final product. The new equipment will be depreciated using MACRS with a 3-year class life. At the end of the project, it is estimated that the equipment could be sold for $90,000. The marketing department estimates that the state will grant the contract at a selling price of department estimates that the project will need an initial net working capital investment of $126,000. The firm's WACC is 12% and the marginal tax rate is 35%. be $150 per ton. The engineering a. Calculate the Net Initial Investment b. Calculate Net after-tax Operating Cash Flows c. Calculate any Terminal Value d. What is the Net Present Value and the Internal Rate of Return? Based on your calculations, would you recommend moving forward with the project or not? Why
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