To solve the bid price problem presented in the text, we set the project NPV equal to zero and found the required price using the definition of OCF. Thus the bid price represents a financial break-even level for the project. This type of analysis can be extended to many other types of problems.

Martin Enterprises needs someone to supply it with 138,000 cartons of machine screws per year to support its manufacturing needs over the next five years, and youve decided to bid on the contract. It will cost you $975,000 to install the equipment necessary to start production; youll depreciate this cost straight-line to zero over the projects life. You estimate that, in five years, this equipment can be salvaged for $124,000. Your fixed production costs will be $550,000 per year, and your variable production costs should be $18.65 per carton. You also need an initial investment in net working capital of $116,000. Assume your tax rate is 23 percent and you require a return of 10 percent on your investment.

a.	Assuming that the price per carton is $28.60, what is the NPV of this project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
b.	Assuming that the price per carton is $28.60, find the quantity of cartons per year you can supply and still break even. (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
c.	Assuming that the price per carton is $28.60, find the highest level of fixed costs you could afford each year and still break even. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Light emitting diode (LED) light bulbs have become required in recent years, but do they make financial sense? Suppose a typical 60-watt incandescent light bulb costs $.51 and lasts for 1,000 hours. A 15-watt LED, which provides the same light, costs $3.70 and lasts for 12,000 hours. A kilowatt-hour is 1,000 watts for 1 hour. Suppose you have a residence with a lot of incandescent bulbs that are used on average 500 hours a year. The average bulb will be about halfway through its life, so it will have 500 hours remaining (and you cant tell which bulbs are older or newer).

If you require a return of 10 percent, at what cost per kilowatt-hour does it make sense to replace your incandescent bulbs today? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 6 decimal places, e.g., 32.161616.)

Light emitting diode (LEDs) light bulbs have become required in recent years, but do they make financial sense? Suppose a typical 60-watt incandescent light bulb costs $.49 and lasts for 1,000 hours. A 15-watt LED, which provides the same light, costs $3.60 and lasts for 12,000 hours. A kilowatt hour of electricity costs $.125. A kilowatt-hour is 1,000 watts for 1 hour. However, electricity costs actually vary quite a bit depending on location and user type. An industrial user in West Virginia might pay $.04 per kilowatt-hour whereas a residential user in Hawaii might pay $.25.

You require a return of 11 percent and use a light fixture 500 hours per year. What is the break-even cost per kilowatt-hour? (Do not round intermediate calculations and round your answer to 6 decimal places, e.g., 32.161616.)

Martin Enterprises needs someone to supply it with 121,000 cartons of machine screws per year to support its manufacturing needs over the next five years, and youve decided to bid on the contract. It will cost you $800,000 to install the equipment necessary to start production; youll depreciate this cost straight-line to zero over the projects life. You estimate that, in five years, this equipment can be salvaged for $148,000. Your fixed production costs will be $445,000 per year, and your variable production costs should be $10.20 per carton. You also need an initial investment in net working capital of $71,000. If your tax rate is 22 percent and you require a return of 10 percent on your investment, what bid price should you submit? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)