Cost straight-line to zero over the projects life

Assignment Help Financial Management
Reference no: EM13883733

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?

Reference no: EM13883733

Questions Cloud

Describe what type of information grocery stores : Describe what type of information grocery stores collect that they can use for data mining purposes. Also, describe how grocery chains use data mining to improve performance.
What is the present value of uneven cash flow stream : What is the present value of the following uneven cash flow stream −$50, $100, $75, and $50 at the end of Years 0 through 3? The appropriate interest rate is 10%, compounded annually. 2. Suppose that on January 1 you deposit $100 in an account that p..
What are some of the misconceptions of adhd : Can the symptoms change as the child ages? Can a child outgrow ADHD? What are some of the misconceptions of ADHD? Review behavioral management techniques that can be used to manage the symptoms of ADD/ADHD
Prepare the statement of cash flows of surmise company : Prepare the statement of cash flows of Surmise Company for the year ended December 31, 2013.
Cost straight-line to zero over the projects 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..
Calculate optimal bundle of contingent claims : Tony Taxpayer earns $2000 in income. Income is taxed at 20%. Tony can underreport his income to the IRS and pay taxes only on the amount he reports, but should he be audited, the IRS will impose a surcharge of 200% on his unpaid taxes; Calculate Tony..
Shuttle eze operates airport shuttle vans in twelve : Shuttle Eze operates airport shuttle vans in twelve large cities Describe the advantages and disadvantages of using a centralized database for Shuttle-Eze.
Describe the incident and its environmental impact : Describe the incident and its environmental impact
What market structure best describes the pizza market : Consider the pizza market in a small college town with the following assumptions: The market is in long-run equilibrium. Each pizza shop sells 100 pizzas per week. (For ease of exposition, suppose that each shop sells only pizza and only one size.) W..

Reviews

Write a Review

Financial Management Questions & Answers

  What is the average accounts payable balance

Big Al's Meat Market has annual sales of $531,000 and cost of goods sold of $358,000. The profit margin is 4.8 percent and the accounts payable period is 41 days. What is the average accounts payable balance?

  About the investment outlay

Talbot Industries is considering launching a new product. The new manufacturing equipment will cost $18 million, and production and sales will require an initial $4 million investment in net operating working capital. What is the initial investment o..

  What is meant by the equilibrium rate of interest

Using the graph below of the supply of loan able funds, SLF, and the demand for loan able funds, DLF, discuss the following:  What is meant by the equilibrium rate of interest? Illustrate and discuss how an autonomous increase in the expected rate of..

  What is the necessary billing efficiency

A small consulting engineering company bought an office building for $910,000. The company has eleven engineers and eight support staff. Monthly expenses for for salaries, utilities, grounds maintenance, etc., are $108,000. Use an average billing rat..

  Withdraw from the retirement account

Hunter Boyd who just turned 32, expects to retire in 35 years when he turns 67. Mr. Boyd just passed Idaho’s Licensed Plumbers LP exam, allowing him to bid on plumbing projects having a total cost less than $25,000. Assuming that inflation is expecte..

  Share repurchase affect the value of the company

lectronic Timing, Inc. (ETI), is a small company founded 15 years ago by electronics engineers Tom Miller and Jessica Kerr. How will this proposal affect the stock price? How will it affect the value of the company? How will a share repurchase affect..

  Standard mortgage with monthly payments and nominal rate

Consider a standard mortgage (360 months) with monthly payments and a nominal rate (monthly compounding) of 5.70%. What portion of the payments during the first 31 months goes toward interest? How Would I figure this out?

  Compare and contrast the internal rate of return

Compare and contrast the internal rate of return approach to the net present value approach to capital rationing. Which is better? Support your answer with well-reasoned arguments and examples.

  Identify the key risks in the project

Identify the key risks in the project and how they might be mitigated - Apply capital budgeting knowledge and entry level skills to a real decision made by a real company.

  Calculate the duration of your bond

A bond has 3 years to maturity, 8% coupon, 7% yield and pays annually. Suppose yield decreases by 15 basis points, calculate the duration of your bond.

  Calculate the monthly payments-annual rate of interest

An apartment complex is valued at $3 million. a hedge fund is looking to buy the property with a $500,000 down payment and a 10 year loan with an annual rate of interest 3.5%. Calculate the monthly payments. After making the monthly payments for 3 ye..

  Expected return on any asset is dependent upon its beta

The expected return on any asset is dependent upon its beta. Explain what Beta is, why it is used and its relevance to investment decisions.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd