Answered step by step
Verified Expert Solution
Link Copied!

Question

00
1 Approved Answer

Your company has been approached to bid on a contract to sell 4,800 voice recognition (VR) computer keyboards a year for four years. Due to

Your company has been approached to bid on a contract to sell 4,800 voice recognition (VR) computer keyboards a 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 Due to technological improvements, beyond that time they will be outdated and no sales will be possible.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 $4.4 million and will be depreciated on a straight-line basis to a zero salvage value. Production will require an investment in net working capital of $101,000 to be returned at the end of the project, and the equipment can be sold for $281,000 at the end of production. Fixed costs are $646,000 per year, and variable costs are $161 per unit. In addition to the contract, you feel your company can sell 10,100, 11,000, 13,100, and 10,400 additional units to companies in other countries over the next four years, respectively, at a price of $340. This price is fixed. The tax rate is 40 percent, and the required return is 10 percent. Additionally, the president of the company will undertake the project only if it has an NPV of $100,000. What bid price should you set for the contract?(Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Business Statistics For Contemporary Decision Making

Authors: Black Ken

8th Edition

978-1118494769, 1118800842, 1118494768, 9781118800843, 978-1118749647

Students also viewed these Accounting questions

Question

Would you be willing to work with them?

Answered: 1 week ago