Shoplift security company


The No- Shoplift Security Company is interested in bidding on a contract to provide a new security system for a large department store chain. The new security system would be phased into 10 stores per year for five years. No- Shoplift can purchase the hardware for $ 50,000 per installation. The labor and material cost per installation is approximately $ 15,000. In addition, No- Shoplift will need to purchase $ 100,000 in new equipment for the installation, which will be depreciated to zero using the straight- line method over five years. This equipment will be sold in five years for $ 25,000. Finally, an investment of $ 50,000 in net working capital will be needed. Assume that the relevant tax rate is 34 percent. If the No- Shoplift Security Company requires a 10 percent return on its investments, what price should it bid?

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Finance Basics: Shoplift security company
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