Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Your company has been approached to bid on a contract to sell 5,050 voice recognition (VR) computer keyboards a year for four years. Due to

image text in transcribed

Your company has been approached to bid on a contract to sell 5,050 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 Due to technological improvements, beyond that time they will be outdated and no sales will be possible.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 $3.6 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 $420,000 to be returned at the end of the project, and the equipment can be sold for $355,000 at the end of production. Fixed costs are $595,000 per year, and variable costs are $80 per unit. In addition to the contract, you feel your company can sell 12,400, 14,500, 18,400, and 10,900 additional units to companies in other countries over the next four years, respectively, at a price of $180. This price is fixed. The tax rate is 25 percent, and the required return is 9 percent. Additionally, the president of the company will undertake the project only if it has an NPV of $125,000. 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.) X Answer is complete but not entirely correct. Bid price 536.60 X

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored 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

Corporate Financial Management

Authors: Glen Arnold

4th Edition

0273719068, 978-0273719069

More Books

Students also viewed these Finance questions

Question

What are some of the important outcomes of job satisfaction?

Answered: 1 week ago

Question

Compare and contrast long-term and short-term orientation cultures

Answered: 1 week ago

Question

Discuss the research behind the notion of a pancultural self

Answered: 1 week ago