Depreciate this cost straight-line to zero over project life

Assignment Help Financial Management

Reference no: EM131883730

Romo Enterprises needs someone to supply it with 115,000 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 $820,000 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 $65,000. Your fixed production costs will be $320,000 per year, and your variable production costs should be $9.80 per carton. You also need an initial investment in net working capital of $70,000. If your tax rate is 35 percent and you require a return of 12 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.)

Reference no: EM131883730

Questions Cloud

What is evanec cost of new common equity-re : What is Evanec's cost of new common equity, re?

Recalculate unlevered net income : General and administrative expenses are $2.8 million per? year, recalculate unlevered net income

Percentage of the company capital structure consists of debt : Hook Industries' capital structure consists solely of debt and common equity. What percentage of the company's capital structure consists of debt?

What is portfolio equilibrium expected return : According to APT, what is the portfolio's equilibrium expected return?

Depreciate this cost straight-line to zero over project life : It will cost you $820,000 to install the equipment necessary to start production; you’ll depreciate this cost straight-line to zero over the project’s life.

What should be the cost of equity of your firm : What should be the cost of equity of your firm?

What is the portfolio equilibrium expected return : According to APT, what is the portfolio's equilibrium expected return?

Why such damages should be awarded : Define the types and amounts of damages that are most likely to be awarded in this case and fully explain why such damages should be awarded.

Compute the present value of paid in two years : Compute the present value of $5,600 paid in two years using the following discount rates: 8 percent in the first year and 7 percent in the second year.

User Account

All Pages