Depreciated on a straight-line basis to zero salvage value

Assignment Help Financial Management

Reference no: EM131515247

Your company has been approached to bid on a contract to sell 4,700 voice recognition (VR) computer keyboards a year for four years. Due to technological improvements, beyond that time they will be outdated and no sales will be possible. The equipment necessary for the production will cost $4.3 million and will be depreciated on a straight-line basis to a zero salvage value. Production will require an investment in net working capital of $100,000 to be returned at the end of the project and the equipment can be sold for $280,000 at the end of production. Fixed costs are $645,000 per year, and variable costs are $160 per unit. In addition to the contract, you feel your company can sell 10,000, 10,900, 13,000, and 10,300 additional units to companies in other countries over the next four years, respectively, at a price of $335. This price is fixed. The tax rate is 35 percent, and the required return is 9 percent. Additionally, the president of the company will only undertake the project if it has an NPV of $100,000. What bid price should you set for the contract?

Reference no: EM131515247

Questions Cloud

The? break-even annual unit sales increase : The? break-even annual unit sales increase? if: sales are 50,000 units in year? 1, the year 1 sales price of $ 260/unit,

Show the downwash angle at the center span : Show that the downwash angle at the center span of the tailplane is given to a good approximation.

What is the ytm for the bond : What’s the YTM for the bond? If the bond is callable in 10 years, with 9% call premium, what’s the YTC?

Create the illusion of reality : How does the narrative: language, description, dialogue, and repetition create the illusion of reality?

Depreciated on a straight-line basis to zero salvage value : The equipment necessary for the production will cost $4.3 million and will be depreciated on a straight-line basis to a zero salvage value.

Estimate the required tail-setting angle : An airplane weighing 100 kN is 24.4 m in span. Its tailplane, which has a symmetrical section and is located 15.2 m behind the center of pressure of the wing.

Protection in regards to their health care : Do you believe that patients have enough protection in regards to their health care? Why or Why not?

What are the values of plain vanilla european options : In the Black Scholes framework, what are the values of the following plain vanilla European options as time to maturity goes to innity:

Estimate the percentage savings in induced drag : Three airplanes of the same type, having elliptical wings with an aspect ratio of 6, fly in vee formation at 67 ms-1 with CL = 1.2.

User Account

All Pages