The technique for calculating a bid price can be extended to many other types of The technique for calculating a bid price can be extended to many other types of

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. Martin

Enterprises needs someone to supply it with $154,000$ 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 $$1,940,000$ 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 $$164,000.$ Your fixed

production costs will be $$279,000$ per year, and your variable production costs should

be $$10\mathrm{.}80$ per carton. You also need an initial investment in net working capital of

$$144,000.$ The tax rate is $24$ percent and you require a return of $13$ percent on your

investment. Assume that the price per carton is $$17\mathrm{.}40.$

a$.$ Calculate the project NPV$.($Do not round intermediate calculations and round your

answer to $2$ decimal places, e$.$g$.,32\mathrm{.}16.)$

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 are 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$.,$

$32\mathrm{.}16.)$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. Martin Enterprises needs someone to supply it with $154,000$ cartons of machine screws per year to support its manufacturing needs over the next five years, and you$$ve decided to bid on the contract. It will cost $$1,940,000$ 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 $$164,000.$ Your fixed production costs will be $$279,000$ per year, and your variable production costs should be $$10\mathrm{.}80$ per carton. You also need an initial investment in net working capital of $$144,000.$ The tax rate is $24$ percent and you require a return of $13$ percent on your investment. Assume that the price per carton is $$17\mathrm{.}40.$

a$.$

Calculate the project NPV$.($Do not round intermediate calculations and round your answer to $2$ decimal places, e$.$g$.,32\mathrm{.}16.)$

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 are 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$.,32\mathrm{.}16.)$