Dahlia Enterprises needs someone to supply it with 110,000 cartons of machine screws per year to...

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Dahlia Enterprises needs someone to supply it with 110,000cartons of machine screws per year to support its manufacturingneeds over the next five years, and you’ve decided to bid on thecontract. It will cost you $770,000 to install the equipmentnecessary to start production; you’ll depreciate this coststraight-line to zero over the project’s life. You estimate that infive years, this equipment can be salvaged for $60,000. Your fixedproduction costs will be $315,000 per year, and your variableproduction costs should be $9.30 per carton. You also need aninitial investment in net working capital of $65,000. If your taxrate is 34 percent and your required return is 10 percent on yourinvestment, what bid price should you submit? (Do not roundintermediate calculations and round your final answer to 2 decimalplaces. (e.g., 32.16))
Bid price $----??

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4.1 Ratings (865 Votes)

after tax salvage value 600001tax rate 60000134 39600 NPV 0 Initial investment present value of operating cash flow at 10 for for 5 years period present value of See Answer

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Dahlia Enterprises needs someone to supply it with 110,000cartons of machine screws per year to support its manufacturingneeds over the next five years, and you’ve decided to bid on thecontract. It will cost you $770,000 to install the equipmentnecessary to start production; you’ll depreciate this coststraight-line to zero over the project’s life. You estimate that infive years, this equipment can be salvaged for $60,000. Your fixedproduction costs will be $315,000 per year, and your variableproduction costs should be $9.30 per carton. You also need aninitial investment in net working capital of $65,000. If your taxrate is 34 percent and your required return is 10 percent on yourinvestment, what bid price should you submit? (Do not roundintermediate calculations and round your final answer to 2 decimalplaces. (e.g., 32.16))Bid price $----??