Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Pls help me solve this question thanks, and stop asking me for extra money to solve the question. Consider a project to supply 100 million

Pls help me solve this question thanks, and stop asking me for extra money to solve the question.image text in transcribed

Consider a project to supply 100 million postage stamps per year to the U.S. Postal Service for the next five years. You have an idle parcel of land available that cost $750,000 five years ago; if the land were sold today, it would net you $1.1 million aftertax. The land can be sold for $1.3 million after taxes in five years. You will need to install $5.4 million in new manufacturing plant and equipment to actually produce the stamps; this plant and equipment will be depreciated straight-line to zero over the project's five-year life. The equipment can be sold for $575,000 at the end of the project. You will also need $450,000 in initial net working capital for the project, and an additional investment of $40,000 in every year thereafter. Your production costs are .29 cents per stamp, and you have fixed costs of $1.1 million per year. If your tax rate is 23 percent and your required return on this project is 10 percent, what bid price should you submit on the contract? (Do not round intermediate calculations and round your answer to 5 decimal places, e.g., 32.16161.) Bid price

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Derivatives And Internal Models

Authors: H. Deutsch

4th Edition

1349307661, 9781349307661

More Books

Students also viewed these Finance questions

Question

2. What is the meaning and definition of Banking?

Answered: 1 week ago

Question

3.What are the Importance / Role of Bank in Business?

Answered: 1 week ago