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Another utilization of cash flow analysis is setting the bid price on a project. To calculate the bid price, we set the project NPV equal to zero and find the required price. Thus the bid price represents a financial break-even level for the project. Guthrie Enterprises needs someone to supply it with 158,000 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 $1,980,000 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 $168,000. Your fixed production costs will be $283,000 per year, and your variable production costs should be $10.30 per carton. You also need an initial investment in net working capital of $148,000. If your tax rate is 34 percent and you require a return of 12 percent on your investment, what bid price per carton should you submit? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Bid price $
Consider an asset that costs $246,400 and is depreciated straight-line to zero over its 8-year tax life. The asset is to be used in a 3-year project; at the end of the project, the asset can be sold for $30,800. Required : If the relevant tax rate is..
The annual interest rate on the loan is 11.46 percent of the unpaid balance. What is the amount of the monthly payments?
Assume the Black-Scholes framework. Consider a 9-month at-the-money European put option on a futures contract. If three months later the futures price is 17.7, what is the price of the put option at that time?
If the required rate of return for this stock is 10.91% , what is the value of a share of common stock today?
TIME VALUE OF MONEY-Assuming a rate of 10% annually, find the FV of $1,000 after 5 years. Find the PV of $1,000 due in 5 years if the discount rate is 10%.
Corporate shareholders are exposed to unlimited liability. Corporations generally face fewer regulations than sole proprietorships.
All of the following are common examples of possible distortion in reported income except
Trevor Price bought 10-year bonds issued by Harvest Foods five years ago for $983.84. The bonds make semiannual coupon payments at a rate of 8.4 percent. If the current price of the bonds is $1,097.53, what is the yield that Trevor would earn by sell..
Compute Webb's debt ratio and interest-bearing debt ratio.
Assume that a firm's earnings per share (EPS) are expected to be $ 2.29 next year
hich of the following provides payment for services regardless of the service provided?
Unilever Cooperates with Many Firms and Nonprofit Organizations to Implement Its Strategy While Creating a More Sustainable Environment Unilever, Why have consumer product companies headquartered in Europe historically used the multidomestic strategy..
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