Guthrie Enterprises needs someone to supply it with 175,000 cartons of machine screws per year to support

Question:

Guthrie Enterprises needs someone to supply it with 175,000 cartons of machine screws per year to support its manufacturing needs over the next five years, and you’ve decided to bid on the contract. It will cost you $1,800,000 to install the equipment necessary to start production; you’ll depreciate this cost straight-line to zero over the project’s life. You estimate that in five years, this equipment can be salvaged for $160,000. Your fixed production costs will be $265,000 per year, and your variable production costs should be $13.25 per carton. You also need an initial investment in net working capital of $175,000. If your tax rate is 35 percent and you require a return of 13 percent on your investment, what bid price should you submit? 

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Corporate Finance Core Principles and Applications

ISBN: 978-1259289903

5th edition

Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford Jordan

Question Posted: