Guthrie Enterprises needs someone to supply it with 149,000 cartons of machine screws per year to...

50.1K

Verified Solution

Question

Finance

Guthrie Enterprises needs someone to supply it with 149,000cartons 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 $1,890,000 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 $159,000. Your fixedproduction costs will be $274,000 per year, and your variableproduction costs should be $9.40 per carton. You also need aninitial investment in net working capital of $139,000. If your taxrate is 35 percent and you require a return of 10 percent on yourinvestment, what bid price per carton should you submit? (Do notround intermediate calculations and round your answer to 2 decimalplaces, e.g., 32.16.) Bid price $

Answer & Explanation Solved by verified expert

3.9 Ratings (512 Votes)

See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Transcribed Image Text

Guthrie Enterprises needs someone to supply it with 149,000cartons 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 $1,890,000 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 $159,000. Your fixedproduction costs will be $274,000 per year, and your variableproduction costs should be $9.40 per carton. You also need aninitial investment in net working capital of $139,000. If your taxrate is 35 percent and you require a return of 10 percent on yourinvestment, what bid price per carton should you submit? (Do notround intermediate calculations and round your answer to 2 decimalplaces, e.g., 32.16.) Bid price $