Question

Singapore Army SAF Procurement Ltd is seeking to place a bid on an Advanced Warfare Digital Device (AWDD). The contract requires the vendor to deliver 5 units of AWDD per year for a duration of 3 years. The labor and material costs run at $10,000 per AWDD, while production space can be leased for $12,000 per year. The project requires $50,000 in new equipment, which will have a resale value of $10,000 after 3 years. Straight-line depreciation to a value of zero is used. Making AWDD requires a $10,000 increase in net working capital. Assume a 30% tax rate and a required return of 15%. Singapore Army SAF Procurement Ltd submits a bid price of $17,000 per unit. Determine whether the vendor would accept the project or not.

          Singapore Army SAF Procurement Ltd is seeking to place a bid on an Advanced Warfare Digital Device (AWDD). The contract requires the vendor to deliver 5 units of AWDD per year for a duration of 3 years. The labor and material costs run at $10,000 per AWDD, while production space can be leased for $12,000 per year. The project requires $50,000 in new equipment, which will have a resale value of $10,000 after 3 years. Straight-line depreciation to a value of zero is used. Making AWDD requires a $10,000 increase in net working capital. Assume a 30% tax rate and a required return of 15%. Singapore Army SAF Procurement Ltd submits a bid price of $17,000 per unit. Determine whether the vendor would accept the project or not.

Added by Anthony S.

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