Let's say there is an investment plan to supply 100,000,000 stamps annually to USPS over...
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Let's say there is an investment plan to supply 100,000,000 stamps annually to USPS over the next five years. You have land that you don't use now, after buying for $750,000 five years ago. If you sell this land now, you can get $1,125,000 on a post-tax basis, and if you sell it after five years, you can get $1,295,000 on a post-tax basis. It costs $5,100,000 to build a new factory to produce stamps and purchase production facilities, and factories and production equipment are depreciated on a straight-line basis over the five-year life of the investment, resulting in a residual value of zero in the books. However, at the end of the life of the investment, the production equipment can be sold for $450,000. The initial investment in a net driver copy is $425,000, and $50,000 has since been invested in a net driver copy every year. The production cost is 0.38 cents (=0.0038 dollars) per stamp, and the annual fixed cost is $1,100,000. If the tax rate applied to you is 23%, and the rate of return you ask for this investment is 10%, what bid price should you offer to win the contract?
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