Please answer fast I give you upvote. Last month your company posted $100,000 with Contracts-R-Us to get approved to bidon contracts via their website. Trump Enterprises is looking for a supplier of red baseballcaps, and your boss wants you to bid on the contract. The company requires 112,000baseball caps per year over the next five years. You estimate that the necessaryequipment will cost $790,000, and the equipment will be depreciated straight-line tozero over the project's life. You believe this equipment can be sold for $62,000 at theend of the project.You further estimate the fixed costs to be $317,000 per year, and the variable productioncosts to be $9.50 per hat. You'll need an initial investment in net working capital of$67,000, but this will be recovered at the end of the project. Your tax rate is 35 percentand you require a return of 12 percent on your investment.What is the lowest bid price (per unit) you should submit (i.e. price where NPV=O)?Part A: Start by calculating the operating cash flow that, when received as an annuity for5 years, would set the NPV = 0. (Do not round intermediate calculations and roundyour answer to 2 decimal places, e.g., 32.16.)OCF*Part B: Now calculate the bid price. (Do not round intermediate calculations andround your answer to 2 decimal places, e.g., 32.16.)Bid price

In capital budgeting the net present value must be zero for the project to financial break even…

Answered: Last month your company posted $100,000…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 19P

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Artisan Metalworks has a bottleneck in their production that occurs within the engraving department. Jamal Moore, the COO, is considering hiring an extra worker, whose salary will be $55,000 per year, to solve the problem. With this extra worker, the company could produce and sell 3,000 more units per year. Currently, the selling price per unit is $25 and the cost per unit is $7.85. Using the information provided, calculate the annual financial impact of hiring the extra worker.
Now assume that it is several years later. The brothers are concerned about the firm’s current credit terms of net 30, which means that contractors buying building products from the firm are not offered a discount and are supposed to pay the full amount in 30 days. Gross sales are now running $1,000,000 a year, and 80% (by dollar volume) of the firm’s paying customers generally pay the full amount on Day 30; the other 20% pay, on average, on Day 40. Of the firm’s gross sales, 2% ends up as bad-debt losses. The brothers are now considering a change in the firm’s credit policy. The change would entail: (1) changing the credit terms to 2/10, net 20, (2) employing stricter credit standards before granting credit, and (3) enforcing collections with greater vigor than in the past. Thus, cash customers and those paying within 10 days would receive a 2% discount, but all others would have to pay the full amount after only 20 days. The brothers believe the discount would both attract additional customers and encourage some existing customers to purchase more from the firm—after all, the discount amounts to a price reduction. Of course, these customers would take the discount and hence would pay in only 10 days. The net expected result is for sales to increase to $1,100,000; for 60% of the paying customers to take the discount and pay on the 10th day; for 30% to pay the full amount on Day 20; for 10% to pay late on Day 30; and for bad-debt losses to fall from 2% to 1% of gross sales. The firm’s operating cost ratio will remain unchanged at 75%, and its cost of carrying receivables will remain unchanged at 12%. To begin the analysis, describe the four variables that make up a firm’s credit policy and explain how each of them affects sales and collections.
At Stardust Gems, a faux gem and jewelry company, the setting department is a bottleneck. The company is considering hiring an extra worker, whose salary will be $67,000 per year, to ease the problem. Using the extra worker, the company will be able to produce and sell 9,000 more units per year. The selling price per unit is $20. The cost per unit currently is $15.85 as shown: What is the annual financial impact of hiring the extra worker for the bottleneck process?
Variety Artisans has a bottleneck in their production that occurs within the engraving department. Arjun Naipul, the COO, is considering hiring an extra worker, whose salary will be $45,000 per year, to solve the problem. With this extra worker, the company could produce and sell 3,500 more units per year. Currently, the selling price per unit is $18 and the cost per unit is $5.85. Using the information provided, calculate the annual financial impact of hiring the extra worker.
Komoka Enterprises needs someone to supply it with 140,000 cartons of machine screws per year to support its manufacturing needs over the next five years, and you’ve decided to bid on the contract. It will cost you $920,000 to install the equipment necessary to start production. The equipment will be depreciated at 30% (Class 10), and you estimate that it can be salvaged for $95,000 at the end of the five-year contract. Your fixed production costs will be $350,000 per year, and your variable production costs should be $15.10 per carton. You also need an initial net working capital of $125,000 . If your tax rate is 35% and you require a 14% return on your investment, what bid price
Martin Enterprises needs someone to supply it with 110,000 cartons of machine screws per year to support its manufacturing needs over the next five years, and you’ve decided to bid on the contract. It will cost you $745,000 to install the equipment necessary to start production; you’ll depreciate this cost straight-line to zero over the project’s life. You estimate that, in five years, this equipment can be salvaged for $93,000. Your fixed production costs will be $335,000 per year, and your variable production costs should be $9.65 per carton. You also need an initial investment in net working capital of $60,000. If your tax rate is 21 percent and you require a return of 9 percent on your investment, what bid price should you submit? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.).
Martin Enterprises needs someone to supply it with 141,000 cartons of machine screws per year to support its manufacturing needs over the next five years, and you’ve decided to bid on the contract. It will cost you $1,810,000 to install the equipment necessary to start production; you’ll depreciate this cost straight-line to zero over the project’s life. You estimate that, in five years, this equipment can be salvaged for $151,000. Your fixed production costs will be $266,000 per year, and your variable production costs should be $8.60 per carton. You also need an initial investment in net working capital of $131,000. If your tax rate is 21 percent and you require a return of 13 percent on your investment, what bid price per carton should you submit? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.
Martin Enterprises needs someone to supply it with 130,000 cartons of machine screws per year to support its manufacturing needs over the next five years, and you’ve decided to bid on the contract. It will cost $1,850,000 to install the equipment necessary to start production; you’ll depreciate this cost straight-line to zero over the project’s life. You estimate that, in five years, this equipment can be salvaged for $140,000. Your fixed production costs will be $625,000 per year, and your variable production costs should be $8.87 per carton. You also need an initial investment in net working capital of $295,000. If your tax rate is 21 percent and you require a 10 percent return on your investment, what bid price per carton should you submit?
Alson Enterprises needs someone to supply it with 185,000 cartons of machine screw per year to support its manufacturing needs over the next five years, and you have decided to bid on the contract. It will cost you $940,000 to install the equipment necessary to start production; you will depreciate this cost straight-line to zero over the project’s life. You estimate that in five years this equipment can be salvaged for $70,000. Your fixed cost production costs will be $305,000 per year, and your variable production costs should be $9.25 per carton. You also need an initial investment in net working capital of $75,000. If your tax rate is 35% and you require a 12% return on your investment, what bid price should submit?
After spending $9,600 on client-development, you have just been offered a big production contract by a new client. The contract will add $196,000 to your revenues for each of the next five years and it will cost you $96,000 per year to make the additional product. You will have to use some existing equipment and buy new equipment as well. The existing equipment is fully depreciated, but could be sold for $45,000 now. If you use it in the project, it will be worthless at the end of the project. You will buy new equipment valued at $29,000 and use the 5-year MACRS schedule to depreciate it. It will be worthless at the end of the project. Your current production manager earns $79,000 per year. Since she is busy with ongoing projects, you are planning to hire an assistant at$38,000 per year to help with the expansion. You will have to immediately increase your inventory from $20,000 to $30,000. It will return to $20,000 at the end of the project is 21% and your discount rate is 14.7%. What…
Give typing answer with explanation and conclusion Komoka Enterprises needs someone to supply it with 140,000 cartons of machine screws per year to support its manufacturing needs over the next five years, and you’ve decided to bid on the contract. It will cost you $920,000 to install the equipment necessary to start production. The equipment will be depreciated at 30% (Class 10), and you estimate that it can be salvaged for $95,000 at the end of the five-year contract. Your fixed production costs will be $350,000 per year, and your variable production costs should be $15.10 per carton. You also need an initial net working capital of $125,000 . If your tax rate is 35% and you require a 14% return on your investment, what bid price
Concrete Company enters into a contract with a customer to build a warehouse for $200,000, with a performance bonus of $40,000 that will be paid based on the timing of completion. The performance bonus will be paid fully if completed by the agree-upon date. The performance bonus decreases by $10,000 per week for every week beyond the agreed-upon completion date. Management estimates that there is a 55% probability that he will complete the project on time, a 30% probability that it will be completed 1 week late, and a 15% probability that it will be completed 2 weeks late. (1). Determine the transaction price that Concrete should compute for this agreement. (2). Assuming that Concrete believes that the probability for completing the project on time is 90% and otherwise it will be finished 1 week late. Determine the transaction price.

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