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Your company has been approached to bid on a contract to sell 2 0 , 0 0 0 voice recognition ( VR ) computer keyboards
Your company has been approached to bid on a contract to sell voice recognition VR computer keyboards per year for four years. Due to technological improvements, beyond that time they will be outdated and no sales will be possible. The equipment necessary for the production will cost $and will be depreciated on a straightline basis to a zero salvage value. Production will require an investment in net working capital of $ to be returned at the end of the project, and the equipment can be sold for $ at the end of production. Fixed costs are $ per yearand variable costs are $ per unit. In addition to the contract, you feel your company can sell and additional units to companies in other countries over the next four years, respectively, at a price of $ This price is fixed. The tax rate is percent, and the required return is percent. Additionally, the president of the company will undertake the project only if it has an NPV of $What bid price should you set for the contract?
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