Bid for contract for modifying agricultural implements

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Reference no: EM131893819

You are considering making a bid for a contract for modifying agricultural implements for a local distributor. The distributer has requested bids for 10 specifically modified trucks each year for the next 5 years for a total of 50 implements in all. The lowest possible price you could possibly charge will result in a $0 NPV at your required rate of return of 17%. The steel base forms cost $9,200 each, facilities are leased for $31,000 per year and labor and material cost $6,600 per implement. New equipment is $70,000 and after tax salvage is $12,000(1-.39) = $7,320. The net working capital will be $5,000 up front in year 0, and reversed at the end of the project. Assuming straight line depreciation, a marginal tax rate of 39%, and a required rate of return of 16%, how much should you bid per implement? Show work.

Reference no: EM131893819

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