The town of Suffolk has put a bid for delivery of 1,000 gust proof tents per year
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Question:
The town of Suffolk has put a bid for delivery of 1,000 gust proof tents per year for five years. Company M would like to compete for the bid. They estimate the cost of equipment to manufacture the tents will be around $300,000 and will be depreciated over five years. A total of $20,000 of net working capital is required in period 0. Variable costs per tent is expected to be $35. The equipment can be sold at the end of five years for $75,000. If the tax rate is 35% and the cost of capital is 20%, what should be the minimum bid price?
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