I need a full analysis of this proposal including a sensitvity


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I need a full analysis of this proposal including a sensitvity alalysis. Custom Manufacturing Proposal.pdf Appendix 6 Custom Fabrication Proposal TRU has received a Request for Proposal (RFP) from Alberta, Saskatchewan, and Manitoba to provide salt silos to all three provinces under the terms of one contract. The stipulated volumes are detailed in the following chart. Alberta Saskatchewan Manitoba Totals 2016 3 3 3 2017 4 4 4 2018 3 3 3 Total 10 10 10 9 12 9 30 The total contract is worth a maximum of $6,075,000 over the three years for the three provinces, and revenues would vary according to the number of silos produced each year. There is a 20% probability that a bid of $6,075,000 would win the contract, a 60% probability for a bid of $5,850,000, and a 20% probability for a bid of $5,300,000. The bid acceptance is not solely based on the lowest price. Winning and fulfilling this contract would create a working relationship with the three provinces that would likely enable TRU to secure other design and fabrication contracts with these and the other provinces, the territories, and large companies. TRU estimates that, after completion of this three-year contract, revenues in 2019 would be 85% of those in 2018, and that revenues in 2020 and beyond would show a 5% increase year over year. TRU would require 8,000 square feet (743.2 square metres) of space to build these large silos. The cost of a five-year lease for a suitable property would be $12.75 per square foot with an annual increase of 2%. In order to fulfill the requirements of the contract, $75,000 in leasehold improvements would be necessary. Based on previous experience with custom contracts, TRU expects a 22% gross margin, which would include rent, materials, labour, and overhead. One administrative support person would be needed from the beginning of 2016 at a cost of $48,000 per year, including benefits. A sales representative would be hired in the second quarter of 2018 to start generating sales for future years. The cost of this position would be $48,000 per year, including benefits, plus 1% commission on new sales, which are not expected in 2018. Engineering fees would vary from year to year, because of differing specifications, as follows: 2016 8.0% of sales 2017 2.5% of sales 2018 2.5% of sales 2019 5.0% of sales 2020 + 5.0% of sales Capital asset requirements are detailed in the following chart. Capital Assets Welding and plant equipment Computers Leasehold improvements Costs $320,000 $3,000 $75,000 CCA Rate 30% 55% Capital Cost Allowance (CCA) Class 43 Class 50 Class 13 (5-year, straight-line amortization) The plant equipment would have a lifespan of 10 years. Software updates would be part of overhead, and the computers themselves would not be replaced. Read more

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