Question

Currently, you are trying to host a summer event for your staff and clients and you were thinking of selling customized wristbands for fundraising. You already bought a light-duty wristband-maker that can produce a maximum of 12,000 units each year. You expect to use the machine for the next 5 years and then sell it for its salvage value of $2,000. According to the manufacturer, you will have an annual variable cost of $1.60 per wristband and a fixed production cost of $14,250 per year. The CCA rate for this asset is 25%, corporate tax rate is 38% and appropriate discount rate is 11%. The manufacturer gave you a 10% discount on a brand new SWB45 Wristband Maker with a suggested retail price of $18,750. The SWB45 will cost you another $700 to install and you also need to lower your net working capital by $5,000. You plan to recapture the net working capital by the end of 5 years. For this event, at what price should you set the minimum selling (bid) price per wristband?