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Consider a project to supply 100 million postage stamps per year to the US Postal Service...

Consider a project to supply 100 million postage stamps per year to the US Postal Service for the next five years. You have an idle parcel of land available that cost $750,000.00 5 years ago; if the land were sold today it would net you $1,125,000 after-tax the land can be sold for $1,295,000 after tax in five years you will need to install 5.1 million in new manufacturing plant and equipment to actually produce the stamps this plant and equipment will be depreciated straight line to zero over the projects live your life the equipment can be sold for $450,000 at the end of the project you will also need $425,000 in initial networking capital for the project and an additional investment of $50,000 in every year there after your production costs are $.38 per stamp and you have dicks cost of $1.1 million per year if your tax rate is 23% and your required return on the project is 10% what bid price should you submit on the contract?

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Tax rate 23%
Calculation of annual depreciation
Depreciation Year-1 Year-2 Year-3 Year-4 Year-5 Total
Cost $        5,100,000 $        5,100,000 $        5,100,000 $        5,100,000 $        5,100,000
Dep Rate 20.00% 20.00% 20.00% 20.00% 20.00%
Depreciation Cost * Dep rate $        1,020,000 $        1,020,000 $        1,020,000 $        1,020,000 $        1,020,000 $      5,100,000
Calculation of after-tax salvage value
Cost of machine $        5,100,000
Depreciation $        5,100,000
WDV Cost less accumulated depreciation $                    -  
Sale price $           450,000
Profit/(Loss) Sale price less WDV $           450,000
Tax Profit/(Loss)*tax rate $           103,500
Sale price after-tax Sale price less tax $           346,500
Calculation of annual operating cash flow
Year-1 Year-2 Year-3 Year-4 Year-5
No of units        100,000,000        100,000,000        100,000,000        100,000,000        100,000,000
Selling price $                     -   $                    -   $                    -   $                    -   $                    -  
Operating ost $                 0.38 $                 0.38 $                 0.38 $                 0.38 $                 0.38
Sale $                     -   $                    -   $                    -   $                    -   $                    -  
Less: Operating Cost $      38,000,000 $      38,000,000 $      38,000,000 $      38,000,000 $      38,000,000
Contribution $    (38,000,000) $    (38,000,000) $    (38,000,000) $    (38,000,000) $    (38,000,000)
Less: Marketting cost $        1,100,000 $        1,100,000 $        1,100,000 $        1,100,000 $        1,100,000
Less: Depreciation $        1,020,000 $        1,020,000 $        1,020,000 $        1,020,000 $        1,020,000
Profit before tax (PBT) $    (40,120,000) $    (40,120,000) $    (40,120,000) $    (40,120,000) $    (40,120,000)
Tax@23% PBT*Tax rate $      (9,227,600) $      (9,227,600) $      (9,227,600) $      (9,227,600) $      (9,227,600)
Profit After Tax (PAT) PBT - Tax $    (30,892,400) $    (30,892,400) $    (30,892,400) $    (30,892,400) $    (30,892,400)
Add Depreciation PAT + Dep $        1,020,000 $        1,020,000 $        1,020,000 $        1,020,000 $        1,020,000
Cash Profit after-tax $    (29,872,400) $    (29,872,400) $    (29,872,400) $    (29,872,400) $    (29,872,400)
Calculation of NPV
10.00%
Year Land Capital Working capital Operating cash Annual Cash flow PV factor, 1/(1+r)^time Present values
0 $        (1,125,000) $      (5,100,000) $         (425,000) $      (6,650,000)                 1.0000 $    (6,650,000)
1 $           (50,000) $    (29,872,400) $    (29,922,400)                 0.9091 $ (27,202,182)
2 $           (50,000) $    (29,872,400) $    (29,922,400)                 0.8264 $ (24,729,256)
3 $           (50,000) $    (29,872,400) $    (29,922,400)                 0.7513 $ (22,481,142)
4 $           (50,000) $    (29,872,400) $    (29,922,400)                 0.6830 $ (20,437,402)
5 $         1,295,000 $           346,500 $           625,000 $    (29,872,400) $    (27,605,900)                 0.6209 $ (17,141,092)
Net Present Value $(118,641,074)
Assume bid price per ticket P
After tax value of bid price 100000000*(1-23%)*P
After tax value of bid price 77000000*P
Sum of PV factor                  3.7908