What bid price should you submit on the contract
Course:- Financial Management
Reference No.:- EM13942979

Assignment Help
Assignment Help >> Financial Management

Consider a project to supply 100 million postage stamps per year to the U.S. Postal Service for the next five years. You have an idle parcel of land available that cost $1,900,000 five years ago; if the land were sold today, it would net you $2,100,000 aftertax. The land can be sold for $2,300,000 after taxes in five years. You will need to install $5.4 million in new manufacturing plant and equipment to actually produce the stamps; this plant and equipment will be depreciated straight-line to zero over the project’s five-year life. The equipment can be sold for $500,000 at the end of the project. You will also need $600,000 in initial net working capital for the project, and an additional investment of $50,000 in every year thereafter. Your production costs are 0.5 cents per stamp, and you have fixed costs of $1,050,000 per year. If your tax rate is 34 percent and your required return on this project is 12 percent, what bid price should you submit on the contract? (Do not round intermediate calculations and round your final answer to 5 decimal places. (e.g., 32.16161))

Put your comment

Ask Question & Get Answers from Experts
Browse some more (Financial Management) Materials
As a financial advisor, you are assigned a new client who is considering investing in one of two stocks, A or B. The table below shows information about the performance of sto
Your firm has an average collection period of 38 days. Current practice is to factor all receivables immediately at a discount of 1.9 percent. What is the effective cost of bo
If you open a savings account that earns 8.5% simple interest per year, what is the minimum number of years you must wait to double your balance? Suppose you open another acco
Harper Jones is evaluating an investment project will have an installed cost of $518,297. The cash flows over the 4-year life of the investment are projected to be $287,636, $
You are purchasing a new car for a price of $38,000. The dealer is offering two financing programs. Program 1 will allow you to take possession of your new car and defer your
A $16,000 portfolio is invested in a risk-free security and two stocks. The beta of stock A is 0.67 while the beta of stock B is 1.64. One-half of the portfolio is invested in
If the interest rate in the United Kingdom is 6 percent, the interest rate in the United States is 7 percent, the spot exchange rate is $1.75/£1, and interest rate parity hold
A company currently pays a dividend of $1.5 per share (D0 = $1.5). It is estimated that the company's dividend will grow at a rate of 16% per year for the next 2 years, then a