COnsider a project to supply 100 million postage stamps per yearto canada post for the next 5 years. You have an idle parcelof land available that cost $1000000 five years ago; if you soldthe land today it would net you $1500000 after tax. If yousold the land five years from now the land can be sold again for$1500000 after tax. You will need to install $3800000 in newmanufacturing plant and equip to actually produce stamps; thisplant and equipment will be depreciated straight-line to zero overthe projects five year life. The equipment can be sold for$680000 at the end of the project. You will need $500000 ininitial net working capital for the project and an additional$50000 every year thereafter. Your production costs are $0.5cents per stamp and you have fixed costs of $90000 peryear. If he tax rate is 34 percent and your required returnon the project is 12 percent what bid price should you submit onthe contract?
Written on May 6th, 2018 by
COnsider a project to supply 100 million postage stamps per yearto canada post f
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