Reference no: EM133189408

Question - Big Brother Industries has been approached to bid on a project to supply 600 units of automatic booster water pump a year for 5 years to selected schools in Klang Valley. The company estimates that the project will need a new equipment that costs RM540,000 and depreciated on a straight-line basis to zero value. The equipment will be disposed at 15 percent of its cost at the end of the project's life. The company also requires a fixed cost of RM44,000 and variable costs of RM175 per unit. Assuming that the company's tax rate and cost of capital are 28 percent and 8 percent respectively. Estimate the minimum bid price that the company should set for this project.