Komoka Enterprises needs someone to supply it with 148,000 cartons of machine screws per year to...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Komoka Enterprises needs someone to supply it with 148,000 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 $948,000 to install the equipment necessary to start production. The equipment will be depreciated at 30% (Class 10), and you estimate that it can be salvaged for $93,000 at the end of the five-year contract. Your fixed production costs will be $443,000 per year, and your variable production costs should be $15.90 per carton. You also need an initial net working capital of $98,000. If your tax rate is 35% and you require a 12% return on your investment, what bid price should you submit? (Do not round your intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response.) Bid price $ per carton Komoka Enterprises needs someone to supply it with 148,000 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 $948,000 to install the equipment necessary to start production. The equipment will be depreciated at 30% (Class 10), and you estimate that it can be salvaged for $93,000 at the end of the five-year contract. Your fixed production costs will be $443,000 per year, and your variable production costs should be $15.90 per carton. You also need an initial net working capital of $98,000. If your tax rate is 35% and you require a 12% return on your investment, what bid price should you submit? (Do not round your intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response.) Bid price $ per carton
Expert Answer:
Answer rating: 100% (QA)
SOLUTION To calculate the bid price we need to determine the present value of all the costs associated with the project including the initial investment the annual fixed and variable production costs ... View the full answer
Related Book For
Fundamentals of corporate finance
ISBN: 978-0078034633
10th edition
Authors: Stephen Ross, Randolph Westerfield, Bradford Jordan
Posted Date:
Students also viewed these accounting questions
-
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...
-
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 solve the bid price problem presented in the text, we set the project NPV equal to zero and found the required price using the definition of OCF. Thus the bid price represents a financial...
-
A rectangular loop of wire with sides 0.20 and 0.35 m lies in a plane perpendicular to a constant magnetic field (see part a of the drawing). The magnetic field has a magnitude of 0.65 T and is...
-
Hanebury Corporations current sales were $12 million. Sales were $6 million 5 years earlier. a. To the nearest percentage point, at what rate have sales been growing? b. Suppose someone calculated...
-
In free space, V = x2y (z + 3) V. Find (a) Eat (3, 4, 6) (b) The charge within the cube 0 < x, y, z < 1.
-
Julie Palmer has trouble keeping her debits and credits equal. During a recent month, Julie made the following errors: a. Julie recorded a $750 payment of rent by debiting rent expense for $75 and...
-
1. G. Johnson and colleagues have analyzed the MAP kinase cascade in which MEKK2 participates in mammalian cells. By a yeast two-hybrid screen (see Chapter 7), MEKK2 was found to bind MEK5, which can...
-
Cash $35,200 $32,000 Accounts receivable 33,000 29,900 Inventory 31,300 47,000 Property, plant, and equipment 99,500 94,500 Unamortized bond discount 4,500 5,000 Cost of goods sold 248,500 383,100...
-
Block C starts from rest and moves down with a constant acceleration. Knowing that after block A has moved 0.5 m its velocity is 0.2 m/s, determine(a) The accelerations of A and C,(b) The velocity...
-
In what ways can the different forms of communication (intrapersonal, interpersonal, small group, public and mass) be enhanced with the aid of technology?
-
What are five configurations and purposes of teams?
-
What are strategies of primary and secondary research?
-
Assume your small team comprises the Social Networking Committee at the headquarters of a chain of restaurants. After the managers of one of the restaurants appear on a reality television show, your...
-
Like most major corporations, the U.S. Census Bureau has multiple, conflicting audiences, among them the president, Congress, press, state governments, citizens (both as providers and users of data),...
-
Integrate the following function using onepoint and twopoint numerical integration (Gauss quadrature). The exact integral is equal to 2. Compare the accuracy of the numerical integration with the...
-
On December 15, 20X2, you began as the new CFO of Trilogy Inc. Trilogy produces and manufactures stainless steel water bottles. You inherited the business (along with all of its problems) from your...
-
Refer to Example 9.15. Add the following functionality to this program: Allow the user to enter the cost of a gallon of gas on each trip and use a function, Cost() to calculate the cost of purchasing...
-
Why is underpricing not a great concern with bond offerings? Use the following information to answer the next three questions. Zipcar, the car sharing company, went public in April 2011. Assisted by...
-
Winnebagel Corp. currently sells 30,000 motor homes per year at $68,000 each and 12,000 luxury motor coaches per year at $105,000 each. The company wants to introduce a new portable camper to fill...
-
Suppose the Japanese yen exchange rate is 80 = $1, and the British pound exchange rate is 1 = $1.58. a. What is the cross-rate in terms of yen per pound? b. Suppose the cross-rate is 129 = 1. Is...
-
The following MINITAB output presents a multiple regression equation y = b0 + b1x1 + b2x2 + b3x3 + b4x4. It is desired to drop one of the explanatory variables. Which of the following is the most...
-
For a sample of size n = 15, the following values were obtained: b0 = 3.71, b1 = 8.38, se = 1.13, (x x)2 = 7.71, x = 13.16. Construct a 95% prediction interval for an individual response when x = 8.
-
A _______________ interval estimates the y-value for a particular individual with a given x-value. In Exercises 3 and 4, fill in each blank with the appropriate word or phrase.
Study smarter with the SolutionInn App