The technique for calculating a bid price can be extended to many other types of problems. Answer the following questions using the same technique as setting a bid price, that is, set the project NPV to zero and solve for the variable in question.
a. In the previous problem, assume that the price per carton is $15 and find the project NPV.
What does your answer tell you about your bid price? What do you know about the number of cartons you can sell and still break even? How about your level of costs?
b. Solve the previous problem again with the price still at $15 but find the quantity of cartons per year that you can supply and still break even. It's less than 200,000.
c. Repeat (b) with a price of $15 and a quantity of 200,000 cartons per year, and find the highest level of fixed costs you could afford and still break even. It's more than $330,000.

  • CreatedOctober 01, 2015
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