Consider a project to supply 100 million postage stamps per year to canada post

Consider a project to supply 100 million postage stamps per year to canada post for the next 5 years. You have an idle parcel of land available that cost $1000000 five years ago; if you sold the land today it would net you $1500000 after tax. If you sold the land five years from now the land can be sold again for $1500000 after tax. You will need to install $3800000 in new manufacturing plant and equip to actually produce stamps; this plant and equipment will be depreciated straight-line to zero over the projects five year life. The equipment can be sold for $680000 at the end of the project. You will need $500000 in initial net working capital for the project and an additional $50000 every year thereafter. Your production costs are $0.5 cents per stamp and you have fixed costs of $90000 per year. If he tax rate is 34 percent and your required return on the project is 12 percent what bid price should you submit on the contract?

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