1. Suppose we can buy the truck platforms for $10,000 each. The facilities we need can be leased for $30,000 per year. The labor and material cost to do the modification works out to be about $6,000 per truck. Total cost per year will thus be $25,000 + 5 (10,000 + 6,000) = $16,000. We will need to invest $80,000 in new equipment. This equipment will be depreciated straight-line to a zero-salvage value over the four years. It will be worth about $5,000 at the end of that time. We will also need to invest $50,000 in raw materials inventory and other working capital items. The relevant tax rate is 21 percent. What price per truck should we bid if we require a 20 percent return on our investment?

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