ues this exersece for this ues question. Assume the variable cost of producing the cartons of precision machine screws is $9 and all other assumptions remain the same. What is the new minimum price for your bid?

Assumptions Cost of Capital Tax Rate = Unit Sales = Price per Unit= $ Cost Per Unit = $ Sales Growth = Capital Expenditure $ Annaul Depreciation $ 16% 35% 150,000 12.11 8.50 0% 780,000 156,000 Year Unit Sales Sales Cost of Sales Gross Profit Selling, General & Admin. Depreciation EBIT Income Tax Unlevered Net Income Add Back Depreciation Subtract Capital Exp $ Subtract Change in NWC $ Free Cash Flow $ 1 2 3 4 5 150,000 150,000 150,000 150,000 150,000 $ 1,815,953 $ 1,815,953 $ 1,815,953 $ 1,815,953 $ 1,815,953 $ 1,275,000 $ 1,275,000 $ 1,275,000 $ 1,275,000 $ 1,275,000 $ 540,953 $ 540,953 $ 540,953 $ 540,953 $ 540,953 $ 240,000 $ 240,000 $ 240,000 $ 240,000 $ 240,000 $ 156,000 $ 156,000 $ 156,000 $ 156,000 $ 156,000 $ 144,953 $ 144,953 $ 144,953 $ 144,953 $ 144,953 $ 50,733 $ 50,733 $ 50,733 $ 50,733 $ 50,733 $ 94,219 $ 94,219 $ 94,219 $ 94,219 $ 94,219 156,000 $ 156,000 $ 156,000 $ 156,000 $ 156,000 (780,000) $ $ $ $ (75,000) $ $ $ $ $ 75,000 (855,000) $ 250,219 $ 250,219 $ 250,219 $ 250,219 $ 325,219 Discount Factor FCF Present Value $ NPV 0.86207 215,706 $ 0.74316 185,954 $ 0.64066 160,305 $ 0.55229 138,194 $ 0.47611 154,841 (855,000) $ 0 Required NWC $ Change in NWC $ Cash Flow Impact of change in NWC $ Present value $ PV(Cash Flow Impact of change in NWC) $ 75,000 $ 75,000 $ (75,000) $ (75,000) $ (39,292) 75,000 $ $ $ $ 75,000 $ $ $ $ 75,000 $ $ $ $ 75,000 $ $ $ $ (75,000) 75,000 35,708 PV(Cash Flow Impact of capital expenditure) $ (780,000) $ 134,483 $ 115,933 $ 99,943 $ 86,157 $ 74,274 Present value PV(depreciation) $ 510,790 NPV = PV(cash flow impact of capital expenditure) + PV(cash flow impact of change in NWC) + PV(cash flow impact of net income and depreciation) O Economic break-even requires NPV=0 PV(cash flow impact of net income) $ 308,502 which is PV(unlevered net income from Year 1 to 5) Denote unlevered net income by letter C, then PV(unlevered net income from Year 1 to 5) = C * Present Value Annuity Factor Present Value Annuity Factor =1/r * (1-1/(1+r)^N), where r=0.16, N=5 3.274 PV(Anr Assumptions Cost of Capital Tax Rate = Unit Sales = Price per Unit= $ Cost Per Unit = $ Sales Growth = Capital Expenditure $ Annaul Depreciation $ 16% 35% 150,000 12.11 8.50 0% 780,000 156,000 Year Unit Sales Sales Cost of Sales Gross Profit Selling, General & Admin. Depreciation EBIT Income Tax Unlevered Net Income Add Back Depreciation Subtract Capital Exp $ Subtract Change in NWC $ Free Cash Flow $ 1 2 3 4 5 150,000 150,000 150,000 150,000 150,000 $ 1,815,953 $ 1,815,953 $ 1,815,953 $ 1,815,953 $ 1,815,953 $ 1,275,000 $ 1,275,000 $ 1,275,000 $ 1,275,000 $ 1,275,000 $ 540,953 $ 540,953 $ 540,953 $ 540,953 $ 540,953 $ 240,000 $ 240,000 $ 240,000 $ 240,000 $ 240,000 $ 156,000 $ 156,000 $ 156,000 $ 156,000 $ 156,000 $ 144,953 $ 144,953 $ 144,953 $ 144,953 $ 144,953 $ 50,733 $ 50,733 $ 50,733 $ 50,733 $ 50,733 $ 94,219 $ 94,219 $ 94,219 $ 94,219 $ 94,219 156,000 $ 156,000 $ 156,000 $ 156,000 $ 156,000 (780,000) $ $ $ $ (75,000) $ $ $ $ $ 75,000 (855,000) $ 250,219 $ 250,219 $ 250,219 $ 250,219 $ 325,219 Discount Factor FCF Present Value $ NPV 0.86207 215,706 $ 0.74316 185,954 $ 0.64066 160,305 $ 0.55229 138,194 $ 0.47611 154,841 (855,000) $ 0 Required NWC $ Change in NWC $ Cash Flow Impact of change in NWC $ Present value $ PV(Cash Flow Impact of change in NWC) $ 75,000 $ 75,000 $ (75,000) $ (75,000) $ (39,292) 75,000 $ $ $ $ 75,000 $ $ $ $ 75,000 $ $ $ $ 75,000 $ $ $ $ (75,000) 75,000 35,708 PV(Cash Flow Impact of capital expenditure) $ (780,000) $ 134,483 $ 115,933 $ 99,943 $ 86,157 $ 74,274 Present value PV(depreciation) $ 510,790 NPV = PV(cash flow impact of capital expenditure) + PV(cash flow impact of change in NWC) + PV(cash flow impact of net income and depreciation) O Economic break-even requires NPV=0 PV(cash flow impact of net income) $ 308,502 which is PV(unlevered net income from Year 1 to 5) Denote unlevered net income by letter C, then PV(unlevered net income from Year 1 to 5) = C * Present Value Annuity Factor Present Value Annuity Factor =1/r * (1-1/(1+r)^N), where r=0.16, N=5 3.274 PV(Anr