Heer Enterprises needs someone to supply it with 160,000 cartons of machine screws per yearto support its manufacturing needs over the next three years, and you've decided to bid on thecontract. It will cost you $840,000 to install the equipment necessary to start production and youestimate that it can be salvaged for $160,000 at the end of the three-year contract. Your fixedproduction costs will be $290,000 per year, and your variable production costs should be $8.50per carton. If you require a 12 percent return on your investment, what is the minimum bid priceyou should submit?

1. No.of cartons of Screws Required for 3 years = 160000 cartons x 3 years = 480000 cartons 2.…

someone to supply it with 160,000 cartons of machine screws per year support its manufacturing needs over the next three years, and you've decided to bid on the contract. It will cost you $840,000 to install the equipment necessary to start production and you stimate that it can be salvaged for $160,000 at the end of the three-year contract. Your fixed roduction costs will be $290,000 per year, and your variable production costs should be $8.50 er carton. If you require a 12 percent return on your investment, what is the minimum bid price ou should submit?

someone to supply it with 160,000 cartons of machine screws per year support its manufacturing needs over the next three years, and you've decided to bid on the contract. It will cost you $840,000 to install the equipment necessary to start production and you stimate that it can be salvaged for $160,000 at the end of the three-year contract. Your fixed roduction costs will be $290,000 per year, and your variable production costs should be $8.50 er carton. If you require a 12 percent return on your investment, what is the minimum bid price ou should submit?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 17EA: Gardner Denver Company is considering the purchase of a new piece of factory equipment that will...

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