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Your company is preparing for a bid to supply garden tools to Garden Pro, Inc. The contract calls for 1,500,000garden tools per year over the
Your company is preparing for a bid to supply garden tools to Garden Pro, Inc. The contract calls for 1,500,000garden tools per year over the next five years.The installation of equipment necessary for the production will cost you $7,000,000.You will depreciate this cost straight-line to zero over the projects life. You estimate that you can sell this equipment at the end of the project for $1,400,000 (pre-tax).The fixed production costs will be $6,000,000 per year, and the variable production costs should be $10 per unit. The project also requires $800,000 in initial investment in net working capital, which is fully recoverable at the end of the project.The tax rate is 25 percent. The projects required rate of return is 20 percent. Find the price that makes the net present value (NPV) of the project equal to zero
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