The Thor Corporation has estimated the following cash flows for a project they plan to bid soon, requiring delivery of 20,000 special plastic hinges annually for five years. The company expects to incur an initial investment of $880,000 to purchase the necessary equipment. Net working capital of $50,000 will also be required in year 0 and none thereafter. The variable cost associated with producing each hinge is $20. The fixed cost per year is estimated $200,000. The equipment can be sold in five years for $100,000. The company uses a 15% cost of capital for similar projects and the marginal tax rate is 35%. Assume straight line depreciation.

Following up on Question 13, after some analysis, they forecast that their competition will bid at a price of $40. They would like to beat this price by quoting $38 per piece. What should the before tax salvage value be for the new equipment in year 5, in order for them to be able to quote $38 per piece.