Question

Alton Enterprises needs someone to supply it with 150,000 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 $425,000 to install the equipment necessary to start production; you will depreciate this

cost straight-line to zero over the project’s life. You estimate that in five years, this equipment can be

salvaged for $50,000. Your fixed production costs will be $150,000 per year, and your variable

production costs should be $6 per carton. You also need an initial investment in net working capital of

$60,000. If your tax rate is 34 percent and you require at least a 20 percent return on your investment,

calculate the lowest bid price you can submit (and not suffer from the winner’s curse).

please put in excel format with formulas thank you

Answer 1