Alson Enterprises needs someone to supply it with 177,000 cartons of machine screws per year to support its manufacturing needs over the next 7 years, and you’ve decided to bid on the contract. It will cost you $920,400 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 7 years, this equipment can be salvaged for $59,000. Your fixed production costs will be $283,200 per year, and your variable production costs should be $10.03 per carton. You also need an initial investment in net working capital of $88,500. If your tax rate is 35 percent and you require a 16 percent return on your investment, you should submit a bid price of????
Alson Enterprises needs someone to supply it with 177,000 cartons of machine screws per year to support its manufacturing needs over the next 7…
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