River Inc. asked suppliers to bid on the 150,000 boxes of gaskets that River purchases...
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River Inc. asked suppliers to bid on the 150,000 boxes of gaskets that River purchases per year to meet manufacturing requirements over the next five years. You have decided to submit a bid to supply gaskets. Equipment installation will cost $780.000. Over six years, the equipment will be fully depreciated basis. You estimate that you can sell the equipment for $100,000 at the end of the project. Fixed costs will be $240,000 a year, and variable costs will be $8.50 per carton. To begin project, you will also need to $75,000 in raw material inventory. After that, working capital will grow by $5,000 per year. You have a 16% cost of capital and a 21% tax rate. What is the minimum bid price per carton that you should bid? Please show work in Excel
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