6. You need to borrow money from the bank to get your business started. What does your pitch to them sound like? Using the proper terminology and having a plan in mind for payment schedules will help you convince them you are a lower-risk client.

Transcribed Image Text:

You are looking to start a business in industrial laundry as you know there is demand in the market. In each case there is a minimum capability threshold that you must exceed and have in place before you can bid on large scale contracts. For these large-scale contracts, you need to be able to complete the required service in a set time period, Knowns Minimum production capacity to bid Initial Cost per unit Salvage value after 10 years Yearly maintenance per unit Production capacity per unit Unknowns How many units do you want to buy? How many occurrences (events requiring laundry) occur What competitor companies are bidding Assumptions You win all 3 contracts which have a life of 10 years, but these are your only customers (no other sources of income), so they have to absorb all of your equipment costs. You can use the annual equivalent of purchasing and salvage costs for those 10 years, we don't need to think about taxes or other costs You have a MARR of 12% We are interested in a price prediction, not what actually happens so you don't need to do calculations for each potential year, just for the overall scenarios asked You are looking to start a business in industrial laundry as you know there is demand in the market. In each case there is a minimum capability threshold that you must exceed and have in place before you can bid on large scale contracts. For these large-scale contracts, you need to be able to complete the required service in a set time period, Knowns Minimum production capacity to bid Initial Cost per unit Salvage value after 10 years Yearly maintenance per unit Production capacity per unit Unknowns How many units do you want to buy? How many occurrences (events requiring laundry) occur What competitor companies are bidding Assumptions You win all 3 contracts which have a life of 10 years, but these are your only customers (no other sources of income), so they have to absorb all of your equipment costs. You can use the annual equivalent of purchasing and salvage costs for those 10 years, we don't need to think about taxes or other costs You have a MARR of 12% We are interested in a price prediction, not what actually happens so you don't need to do calculations for each potential year, just for the overall scenarios asked

Answer rating: 100% (QA)

Calculate the annual equivalent AE of the cost per unit then decide how many units are required to meet the minimum bidding requirement Given Initial Cost per unit 100000 Salvage Value after 10 years ... View the full answer