Question
You have the opportunity to bid on a project that involves manufacturing 110,000 units per year for 4 years. The project will require $698,000 in
You have the opportunity to bid on a project that involves manufacturing 110,000 units per year for 4 years. The project will require $698,000 in fixed assets that would be depreciated straight-line to zero over the project's life. These assets have an expected pretax salvage value of $149,000 at the end of the project. The project would require $56,000 of net working capital, all of which is recoverable, along with $312,000 in annual expenses. What is the minimum price per unit you should bid on this project if you require a rate of return of 18 percent and have a tax rate of 34 percent?
A)$6.0184
B)$4.9272
C)$5.4723
D)$5.3133
E)$5.7040
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