Adequate information: Salvage value = $150,000 Cost of equipment (C) = $2,100,000 Fixed cost (FC) = $650,000 Net working capital (NWC) = $325,000 Variable cost per unit (V) = $9.45 Useful life of equipment = 5 years Number of cartons (Q) = 145,000 Tax rate (T) = 21% or 0.21 Required rate of return (r) = 11% or 0.11 To compute: Bid price of the contract Introduction: Net present value is defined as the summation of the present value of cash inflows in each period minus the summation of the present value of cash outflow . Bid price refers to the price which the investors are willing to pay for the purchase of security, commodity, or contract.

Question

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Answer 1

Question

Chapter 6, Problem 34QAP

Summary Introduction

Adequate information:

Salvage value = $150,000

Cost of equipment (C) = $2,100,000

Fixed cost (FC) = $650,000

Net working capital (NWC) = $325,000

Variable cost per unit (V) = $9.45

Useful life of equipment = 5 years

Number of cartons (Q) = 145,000

Tax rate (T) = 21% or 0.21

Required rate of return (r) = 11% or 0.11

To compute: Bid price of the contract

Introduction: Net present value is defined as the summation of the present value of cash inflows in each period minus the summation of the present value of cash outflow.

Bid price refers to the price which the investors are willing to pay for the purchase of security, commodity, or contract.

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Answer 2

Question

Chapter 6, Problem 34QAP

Summary Introduction

Adequate information:

Salvage value = $150,000

Cost of equipment (C) = $2,100,000

Fixed cost (FC) = $650,000

Net working capital (NWC) = $325,000

Variable cost per unit (V) = $9.45

Useful life of equipment = 5 years

Number of cartons (Q) = 145,000

Tax rate (T) = 21% or 0.21

Required rate of return (r) = 11% or 0.11

To compute: Bid price of the contract

Introduction: Net present value is defined as the summation of the present value of cash inflows in each period minus the summation of the present value of cash outflow.

Bid price refers to the price which the investors are willing to pay for the purchase of security, commodity, or contract.

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Answer 3

Question

Chapter 6, Problem 34QAP

Summary Introduction

Adequate information:

Salvage value = $150,000

Cost of equipment (C) = $2,100,000

Fixed cost (FC) = $650,000

Net working capital (NWC) = $325,000

Variable cost per unit (V) = $9.45

Useful life of equipment = 5 years

Number of cartons (Q) = 145,000

Tax rate (T) = 21% or 0.21

Required rate of return (r) = 11% or 0.11

To compute: Bid price of the contract

Introduction: Net present value is defined as the summation of the present value of cash inflows in each period minus the summation of the present value of cash outflow.

Bid price refers to the price which the investors are willing to pay for the purchase of security, commodity, or contract.

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Answer 4

Question

Chapter 6, Problem 34QAP

Summary Introduction

Adequate information:

Salvage value = $150,000

Cost of equipment (C) = $2,100,000

Fixed cost (FC) = $650,000

Net working capital (NWC) = $325,000

Variable cost per unit (V) = $9.45

Useful life of equipment = 5 years

Number of cartons (Q) = 145,000

Tax rate (T) = 21% or 0.21

Required rate of return (r) = 11% or 0.11

To compute: Bid price of the contract

Introduction: Net present value is defined as the summation of the present value of cash inflows in each period minus the summation of the present value of cash outflow.

Bid price refers to the price which the investors are willing to pay for the purchase of security, commodity, or contract.

Expert Solution & Answer

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Answer 5

Chapter 6, Problem 34QAP

Summary Introduction

Adequate information:

Salvage value = $150,000

Cost of equipment (C) = $2,100,000

Fixed cost (FC) = $650,000

Net working capital (NWC) = $325,000

Variable cost per unit (V) = $9.45

Useful life of equipment = 5 years

Number of cartons (Q) = 145,000

Tax rate (T) = 21% or 0.21

Required rate of return (r) = 11% or 0.11

To compute: Bid price of the contract

Introduction: Net present value is defined as the summation of the present value of cash inflows in each period minus the summation of the present value of cash outflow.

Bid price refers to the price which the investors are willing to pay for the purchase of security, commodity, or contract.

Answer 6

Chapter 6, Problem 34QAP

Summary Introduction

Adequate information:

Salvage value = $150,000

Cost of equipment (C) = $2,100,000

Fixed cost (FC) = $650,000

Net working capital (NWC) = $325,000

Variable cost per unit (V) = $9.45

Useful life of equipment = 5 years

Number of cartons (Q) = 145,000

Tax rate (T) = 21% or 0.21

Required rate of return (r) = 11% or 0.11

To compute: Bid price of the contract

Introduction: Net present value is defined as the summation of the present value of cash inflows in each period minus the summation of the present value of cash outflow.

Bid price refers to the price which the investors are willing to pay for the purchase of security, commodity, or contract.

Answer 7

Chapter 6, Problem 34QAP

Summary Introduction

Adequate information:

Salvage value = $150,000

Cost of equipment (C) = $2,100,000

Fixed cost (FC) = $650,000

Net working capital (NWC) = $325,000

Variable cost per unit (V) = $9.45

Useful life of equipment = 5 years

Number of cartons (Q) = 145,000

Tax rate (T) = 21% or 0.21

Required rate of return (r) = 11% or 0.11

To compute: Bid price of the contract

Introduction: Net present value is defined as the summation of the present value of cash inflows in each period minus the summation of the present value of cash outflow.

Bid price refers to the price which the investors are willing to pay for the purchase of security, commodity, or contract.

Answer 8

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Answer 9

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Answer 10

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Answer 11

Ch. 6 - Opportunity Cost In the context of capital...Ch. 6 - Prob. 2CQ Ch. 6 - Incremental Cash Flows Your company currently...Ch. 6 - Depreciation Given the choice, would a firm prefer...Ch. 6 - Prob. 5CQ Ch. 6 - Prob. 6CQ Ch. 6 - Equivalent Annual Cost When is EAC analysis...Ch. 6 - Prob. 8CQ Ch. 6 - Capital Budgeting Considerations A major college...Ch. 6 - To answer the next three questions, refer to the...

Solution Summary: The author explains how to calculate the after-tax Salvage Value (ATSV) of the contract.

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Chapter 6 Solutions