Compute the investment bid price


Question: XYZ INC. is thinking about making a bid to sell 185,000 cartons of machine screws per year over the next 5 years to a manufacturer that uses the screws in its production process. It will cost XYZ $940,000 to install the equipment necessary to start production of the screws, & the cost of that equipment will be depreciated [to zero] on a straight line basis over the life of the project. It is estimated that the equipment can be salvaged at the end of five years for dollar 70,000. Your fixed production costs will be dollar 305,000 per year, and your variable production costs should be dollar 9.25 per carton. You will also need an initial investment in net working capital of $75,000 [to be returned at the end of the project]. Tax rate is 35% & and XYZ require a 12% return on investment, determine bid price should XYZ submit?

Request for Solution File

Ask an Expert for Answer!!
Finance Basics: Compute the investment bid price
Reference No:- TGS018570

Expected delivery within 24 Hours