Cost straight-line to zero over the project life

Assignment Help Financial Management

Reference no: EM131349069

Romo Enterprises needs someone to supply it with 121,000 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 $880,000 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 $71,000. Your fixed production costs will be $326,000 per year, and your variable production costs should be $10.40 per carton. You also need an initial investment in net working capital of $76,000. If your tax rate is 30 percent and you require a return of 11 percent on your investment, what bid price should you submit? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Bid price $ _______

Reference no: EM131349069

Questions Cloud

What is this gift worth at the present time : Your rich uncle has just given you a high school graduation present of $1,600,000. The present, however, is in the form of a 27-year bond with an annual interest rate of 3.3% compounded annually. The bond says that it will be worth $1,600,000 in 27 y..

Higher level of fixed costs in its operating cost structure : If a firm uses a higher level of fixed costs in its operating cost structure, then

Compute eac for both machines : You are evaluating two different silicon wafer milling machines. The Techron I costs $258,000, has a three-year life, and has pretax operating costs of $69,000 per year. The Techron II costs $450,000, has a five-year life, and has pretax operating co..

Issue floating rate bond denominated in foreign currency : What factors should be considered by a U.S. firm that plans to issue a floating rate bond denominated in a foreign currency? Is the risk of issuing a floating rate bond higher or lower than the risk of issuing a fixed rate Eurobond? Explain.

Cost straight-line to zero over the project life : Romo Enterprises needs someone to supply it with 121,000 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 $880,000 to install the equipment nec..

Net annual savings be if service were adopted : Your firm has an average receipt size of $130. A bank has approached you concerning a lockbox service that will decrease your total collection time by two days. You typically receive 7,200 checks per day. The daily interest rate is .018 percent. The ..

Corporation taxable income is sufficient : Allison is the sole shareholder of Destiny Corporation, which operates a travel agency for business travelers. Allison would like the corporation to donate some used computers to a local private school dedicated to the education of young ladies. The ..

What was the company interest expense : Monosodium Glutimate Corporation has $90 million in total assets and its corporate tax rate is 40 percent. The company recently reported that its basic earning power (BEP) ratio was 20 percent and its return on assets (ROA) was 9 percent. What was th..

Inventory conversion period-receivables collection period : The inventory conversion period (ICP) plus the Receivables collection period (RCP) is equal to the

User Account

All Pages