To solve the bid price problem presented in the text, we set theproject NPV equal to zero and found the required price using thedefinition of OCF. Thus the bid price represents a financialbreak-even level for the project. This type of analysis can beextended to many other types of problems. Romo Enterprises needssomeone to supply it with 126,000 cartons of machine screws peryear to support its manufacturing needs over the next five years,and you’ve decided to bid on the contract. It will cost you$930,000 to install the equipment necessary to start production;you’ll depreciate this cost straight-line to zero over theproject’s life. You estimate that, in five years, this equipmentcan be salvaged for $76,000. Your fixed production costs will be$331,000 per year, and your variable production costs should be$10.90 per carton. You also need an initial investment in networking capital of $81,000. Assume your tax rate is 35 percent andyou require a 12 percent return on your investment.

a. Assuming that the price per carton is $17.60, what is the NPVof this project? (Do not round intermediate calculations and roundyour answer to 2 decimal places, e.g., 32.16.)

NPV $

b. Assuming that the price per carton is $17.60, find thequantity of cartons per year you need to supply to break even. (Donot round intermediate calculations and round your answer tonearest whole number.)

Quantity of cartons

c. Assuming that the price per carton is $17.60, find thehighest level of fixed costs you could afford each year and stillbreak even. (Do not round intermediate calculations and round youranswer to 2 decimal places, e.g., 32.16.)

Fixed costs $