bidding

You are required to submit a bid to supply 200,000,000 widgets per year to the State of Illinois for the next five years. Your company has an idle tract of real estate that cost \$1,500,000 ten years ago; if your company sold the land today, it would generate \$3,000,000 after the taxes were paid. The land can be sold for \$3,500,000 after taxes in five years. You will need to install \$4,900,000 in new plant and equipment to actually produce the widgets; this plant and equipment will be depreciated straight-line to zero over the projects five year life. The equipment can be sold for \$610,000 at the end of the project. You will need \$500,000 in initial working capital for the project, and an additional investment of \$60,000 in every year thereafter. Your production costs are .6 cents per widget and you will have fixed costs of \$800,000 per year. If your tax rate is 34% and your required return is 14%, what bid price per widget should you submit?

#### Related Questions in Financial Management

• ##### Q :Example of equilibrium model as Capital

Explain the example of equilibrium model as Capital Asset Pricing Model.

• ##### Q :Difference in cash budget and pro forma

Explain the dissimilarities in a cash budget and pro forma financial statements? Why pro forma financial statements are not utilized to forecast cash requirements.

• ##### Q :What is a Coherent Risk Measure What is

What is a Coherent Risk Measure?

• ##### Q :Variation coefficient mostly considered

What is the reason that variation coefficient mostly considered a better risk measure while comparing different projects than the standard deviation?

• ##### Q :Reach a tutor for financial management

how to reach tutor for financial management problems?

• ##### Q :Add random numbers While you have some

While you have some random numbers for adding, get normal them then multiply them, is it important in finance?

• ##### Q :Relation between net present value and

Describe the relation between net present value and the value of the firm?

• ##### Q :Illustrates an example of Co-integration

Illustrates an example of Co-integration?

• ##### Q :Explain distribution of individual or

Explain distribution of individual numbers or random numbers.