Cash flow analysis is setting the bid price on the project

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Reference no: EM131182738

A utilisation of cash flow analysis is setting the bid price on the project.To calculate the bid price we set the project NPW equal zero and find a required price. Thus the bid price represents a financial break even level for the project. Guthrie enterprise needs someone to supply it with 140000 cartoons of machine screws per year to support its manufacturing needs over the next five years and you decided to bid on the contract. Before you made the decision you paid consulting firm $100000 last year for evaluating this project. It will cost you $1800000 to install the equipment to start production and you will depreciate this cost straight line to zero over the project life.in five years this equipment can be salvage fit $150000Your fixed production cost will be $265000 per year and variable shoul be $8.50 per cartoon.You need initial investment in net working capital $130000 tax rate is 35% and required 14 % return on your investment. What bid price shoul you submit? Show all working steps explanation and formulas

Reference no: EM131182738

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