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 ideal parcel of land available that cost $7500000 five years ago; if the land were sold today it would net you 1125000 after tax. The land can be sold for 1295000 after in five years. You will need install 5.1 million in new manufacturing plant and equipment to actually produce the stamps. This plant and equipment will be depreciating straight line to zero over the project’s five-year life. The equipment can be sold 450000 at the end of project. You will also need $425000 in initial net working capital for the project, and an additional investment of $50000 in every year thereafter. Your production cost .38 per stamp and you have fix costs of $1100000 per year. If your tax rate is 23 percent and your required return on this project is 10 percent, what bid price should you submit on the contract?

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jeff jeffy answered 1 year ago

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