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QUESTION

You have the opportunity to bid on a project to provide the U. government with 2,500whatchamacallits per year for five years.

You have the opportunity to bid on a project to provide the U.S. government with 2,500whatchamacallits per year for five years. You have decided for the project to be worthwhile youwill need to earn a 15% annual return. To make the whatchamacallits, you will have to increaseinventory by $50,000 and purchase new equipment for $475,000 which will be depreciated on astraight-line basis. At the conclusion of the project, the machinery will have a value of $50,000.Each year, you estimate that production will cost you $17.50 per whatchamacallit. If your taxrate is 40%, what price do you need to set per whatchamacallit?

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