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 break$-$even level for the project. This type of analysis can be

extended to many other types of problems.

Martin Enterprises needs someone to supply it with $142,000$ 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 $$995,000$ to install the equipment necessary to

start production; you'll depreciate this cost straight$-$line to zero over the project's life. You

estimate that, in five years, this equipment can be salvaged for $$136,000.$ Your fixed

production costs will be $$570,000$ per year, and your variable production costs should

be $$19\mathrm{.}05$ per carton. You also need an initial investment in net working capital of

$$124,000.$ Assume your tax rate is $22$ percent and you require a return of $11$ percent on

your investment.

a$.$ Assuming that the price per carton is $$29\mathrm{.}40,$ what is the NPV of this project? $($Do not

round intermediate calculations and round your answer to $2$ decimal places, e$.$g$.,$

$32\mathrm{.}16.)$

b$.$ Assuming that the price per carton is $$29\mathrm{.}40,$ find the quantity of cartons per year that

you can supply and still break even. $($Do not round intermediate calculations and

round your answer to the nearest whole number, e$.$g$.,32.)$

c$.$ Assuming that the price per carton is $$29\mathrm{.}40,$ find the highest level of fixed costs you

could afford each year and still break even. $($Do not round intermediate calculations

and round your answer to $2$ decimal places, e$.$g$.,32\mathrm{.}16.)$