Consider a project to supply 105 million postage stamps per year to the U.S. Postal...
80.2K
Verified Solution
Link Copied!
Question
Accounting
Consider a project to supply 105 million postage stamps per year to the U.S. Postal Service for the next five years. You have an idle parcel of land available that cost $1,730,000 five years ago; if the land were sold today, it would net you $1,805,000 aftertax. The land can be sold for $1,753,000 after taxes in five years. You will need to install $5.6 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 five-year life. The equipment can be sold for $700,000 at the end of the project. You will also need $600,000 in initial net working capital for the project, and an additional investment of $55,000 in every year thereafter. Your production costs are .53 cents per stamp, and you have fixed costs of $1,100,000 per year. If your tax rate is 21 percent and your required return on this project is 11 percent, what bid price should you submit on the contract?
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
