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Bid price for a contract

Heer Enterprises needs someone to supply it with 198,000 cartons of machine screws per year to support its manufacturing needs over the next 6 years, and you've decided to bid on the contract. It will cost you $1,029,600 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 6 years, this equipment can be salvaged for $66,000. Your fixed production costs will be $316,800 per year, and your variable production costs should be $11.22 per carton. You also need an initial investment in net working capital of $99,000. If your tax rate is 32 percent and you require a 19 percent return on your investment, you should submit a bid price of $ .

 

Business Economics, Economics

  • Category:- Business Economics
  • Reference No.:- M928475

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