Consider a project ot supply 60,800,000 postage stamps to the U.S. postal servic

Question

Consider a project ot supply 60,800,000 postage stamps to the U.S. postal service for the next 5 years. You have an idle parcel of land available that cost $760,000 five years ago: if the land were sold today, it would net you $912,000 aftertax. The land can be sold for $1,500,000 after taxes in 5 years. You will need to install $2,356,000 in new manufacturing plant and quipment ot actually produce the stamps; this plant and equipment will be depreciated straight-line to zero over the project's 5-year life. The equipment can be sold for $456,000 AT THE END OF THE PROJECT. YOU will also need $469,000 in initial new working capital for the project, and an additional investment of $38,000 in every year therafter. All net working capital will be recovered wen the project ends. Yuor production costs are 0.38 cents per stamp, and you have fixed costs of $608,000 per year. Your tax rate is 31% and your required return on this project is 11%. What bid price per stamp should you submit?

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Consider a project ot supply 60,800,000 postage stamps to the U.S. postal servic

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