Please use the following information for Questions 1 7 Setting a Bid Price Company A needs to determine a bid price for a project it has received from Company B Company B is looking for a Producer to supply it with 450,000 widgets each year for the next seven years To undertake this project, company A will have to install new equipment at a cost of $510,000 This will be considered a Class 8 asset with a 20 CCA rate and is subject to Accelerated Investment Incentive rules Company A expects to sell the equipment for $125,000 after 7 years Annual productions costs are estimated as follows variable costs per widget of $7 00 and fixed costs of $130,000 per year Company A expects the new contract would lead to an immediate increase of $35,000 in NWC, which will be recovered at the end of the project The firm has a 30 tax rate and it wants a 15 return What bid price should it submit Based on your answers to the first six questions, what is the appropriate course of action to follow Multiple Choice Submit a bid price of 8 52 per widget Submit a bid price of 7 59 per widget Submit a bid price of 4 98 per widget This project cannot be profitable and should be rejected Please use the following information for Questions 8 14 Cost Cutting a company can spend $1,7500,000 today on the purchase and installation of a new automated equipment that has a potential opportunity to cut costs The equipment will have a nine year life, at which time it can be sold for $134,000 The equipment qualifies as a Class 8 asset with a 20 CCA rate Since the equipment will be purchased in 2020, it is subject to the Accelerated Investment Incentive rules, rather than the half year rule The benefit of installing the new equipment is a reduction in material costs of $280,000 per year The new process will lead to an immediate increase in Net Working Capital (NWC) of $47,000, which will be recovered at the conclusion of the project The firm has a 25 corporate tax rate and it wants a 17 return Should they buy this cost cutting equipment What is the correct value for Step 1 Multiple Choice $1,280,000 $1,340,000 $1,750,000 $1,260,000

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Please use the following information for Questions 1-7: Setting a Bid Price : Company A needs to determine a bid price for a project it

Please use the following information for Questions 1-7:

Setting a Bid Price: Company A needs to determine a bid price for a project it has received from Company B. Company B is looking for a Producer to supply it with 450,000 widgets each year for the next seven years. To undertake this project, company A will have to install new equipment at a cost of $510,000. This will be considered a Class 8 asset with a 20% CCA rate and is subject to Accelerated Investment Incentive rules. Company A expects to sell the equipment for $125,000 after 7 years. Annual productions costs are estimated as follows: variable costs per widget of $7.00 and fixed costs of $130,000 per year. Company A expects the new contract would lead to an immediate increase of $35,000 in NWC, which will be recovered at the end of the project. The firm has a 30% tax rate and it wants a 15% return. What bid price should it submit?

Based on your answers to the first six questions, what is the appropriate course of action to follow?

Multiple Choice

Submit a bid price of 8.52 per widget
Submit a bid price of 7.59 per widget
Submit a bid price of 4.98 per widget
This project cannot be profitable and should be rejected

Please use the following information for Questions 8-14:

Cost Cutting: a company can spend $1,7500,000 today on the purchase and installation of a new automated equipment that has a potential opportunity to cut costs. The equipment will have a nine-year life, at which time it can be sold for $134,000. The equipment qualifies as a Class 8 asset with a 20% CCA rate. Since the equipment will be purchased in 2020, it is subject to the Accelerated Investment Incentive rules, rather than the half-year rule. The benefit of installing the new equipment is a reduction in material costs of $280,000 per year. The new process will lead to an immediate increase in Net Working Capital (NWC) of $47,000, which will be recovered at the conclusion of the project. The firm has a 25% corporate tax rate and it wants a 17% return. Should they buy this cost-cutting equipment?

What is the correct value for Step #1?

Multiple Choice