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You want to bid on a contract that requires you to supply 110,000 cartons of machine screws per year over three years. It will cost
You want to bid on a contract that requires you to supply 110,000 cartons of machine screws per year over three years. It will cost you $940,000 to install the equipment necessary to start production; you will depreciate this cost straight-line to zero over the project's life. You estimate that in three years, this equipment can be salvaged for $75,000. Your fixed production costs will be $850,000 per year and your variable production costs should be $21.43 per carton. You also need an initial investment in net working capital of $90,000. Your tax rate is 21% and required return is 12% on this investment. Which of the following is the lowest possible bid price you can submit? Assume that you should submit a bid price per carton without decimal place
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