ABC Corporation needs to purchase 225,000 boxes of needles per year to support its manufacturing operation over
Question:
ABC Corporation needs to purchase 225,000 boxes of needles per year to support its manufacturing operation over the next 7 years. You have decided to bid on the contract. It will cost you $1,230,000 to install the equipment needed for starting production. This equipment will be depreciated using straight-line method to zero over the project's life, and is estimated to have a salvage value of $75,000. You estimate the fixed costs will be $360,000 per year and the variable costs will be $13.20 per box. An initial investment in networking capital is estimated at $112,500, and will be recovered at the end of the project. The tax rate is 32%; What price per box should you bid if you require a rate of return of 13%?
Financial and Managerial Accounting the basis for business decisions
ISBN: 978-0078025778
17th edition
Authors: Jan Williams, Susan Haka, Mark Bettner, Joseph Carcello