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The Thor Corporation has estimating the following cash flows for a bidding project that requires thedelivery of 20,000 units per year of special plastic hinges
The Thor Corporation has estimating the following cash flows for a bidding project that requires thedelivery of 20,000 units per year of special plastic hinges for a five-year period. To supply the preducts the company will incur an initial investment of $880,000 to purchase an equipment that will last fiveyears, Net working capital of $30,000 will 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 accepting projects and the marginal tax rate is 35%. What is the minimum bid price they should quote? Use straight-line depreciation
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