Question 4: Your company has been approached to bid on a contract to sell 10 phone...

Question 4: Your company has been approached to bid on a contract to sell 10 phone booths each year for the next 5 years. Your initial equipment cost will be $5,000. You’ll depreciate this cost straight-line to zero over the next 5 years. You believe the equipment can be repurposed and salvaged for $2,000. You expect fixed costs each year to amount to $500 with variable costs equal to $1,000/booth. Initial NWC needs are $750 and are fully recovered at the end of the project. If your required rate of return is 15%, what price per phone booth should you bid? Assume a tax rate of 20%.

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ekkarill92 answered 1 year ago

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