What bid price should you submit

Assignment Help Financial Management

Reference no: EM13881937

Dahlia Enterprises needs someone to supply it with 117,000 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 $840,000 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 $67,000. Your fixed production costs will be $322,000 per year, and your variable production costs should be $10.00 per carton. You also need an initial investment in net working capital of $72,000. If your tax rate is 30 percent and your required return is 11 percent on your investment, what bid price should you submit? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Reference no: EM13881937

Questions Cloud

What are three most common forms of business organizations : What are the three most common forms of business organizations in the United States? What are the three basic types of agency relationships? What is the BMW v. Gore test and how is it used?

Principal are loyalty-obedience-performance : The duties of an agent to her principal are loyalty, obedience, performance and which of the following: Administrative law agencies usually have three types of authority.

Calculate the cost of fuel of conventional energy system : Calculate the cost of fuel of a conventional (non-solar) energy system for 12 years, if the total annual load is 152 GJ and the fuel price is $14/GJ, the market discount rate is 8%, and the fuel inflation rate is 5% per year.

The initial cost of a solar energy system : The initial cost of a solar energy system is $14,000. If this amount is paid with a 30% down payment and the balance is borrowed at 8% interest for 12 years, calculate the annual payments [A] and interest charges [B] for a market discount rate of 6%...

What bid price should you submit : Dahlia Enterprises needs someone to supply it with 117,000 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 $840,000 to install the equipment n..

Consistent with the semi-strong form of market efficiency : Geothermal corporation issued a press release before the stock market opened announcing that its earnings are above last year’s earnings. Explain how each of the following individual scenarios could be consistent with the semi-strong form of market e..

Set out the playoffs on this portfolio on expiration date : Suppose you create a portfolio by holding 100 shares of mcdonalds stock, writing a call option on the stock with an exercise price of 55 and one year to expiration and writing a put option on the same stock with an exercise price of 25 and one year t..

Unbiased expectations theory of structure of interest rates : Suppose we observe the following rates: 1R1 = 3%, 1R2 = 5%. If the unbiased expectations theory of the term structure of interest rates holds, what is the 1-year interest rate expected one year from now, E(2r1)?

The current spot exchange rate : The current spot exchange rate is $1.55 = €1.00 and the three-month forward rate is $1.60 = €1.00. Consider a three-month American call option on €62,500 with a strike price of $1.50 = €1.00. If you pay an option premium of $5,000 to buy this call, a..

User Account

All Pages