Company Times needs other company to supply 3,500 tons of copper per year for manufacturing...
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Company Times needs other company to supply 3,500 tons of copper per year for manufacturing in next 5 years, and you are interested in this contract. It will cost $15 million to buy the equipment for production. And you can depreciate this cost straight-line to zero over the project life. The market value of the retired machine is zero. Your production costs will be $2,825,000 per year. You also invested an initial investment in net working capital of $685,000, which will be fully recovered at the end of the project. If your tax rate is 25 percent and you require a 12 percent return on this investment, what bid price should you submit?
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