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TENDER REPORT TO GOVERNMENT (THE COMPANY IS10)

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Running head: TENDER REPORT TO GOVERNMENT (THE COMPANY IS10) 1
TENDER REPORT TO GOVERNMENT (THE COMPANY IS10)
Name
Institution

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TENDER REPORT TO GOVERNMENT (THE COMPANY IS10) 2
Price and cost assumptions
The following assumption will be considered when comparing different service options:
The services will be offered for a period of five years
There will be no major technological innovations during the evaluation but will be
applied during the entire time of implementation.
Costs incurred during a financial year are discounted at the rate that is applied at the end
of the year.
The service will be offered by a highly trained team by the firm.
The cost of capital will be assumed to be 9.98 percent implying that the total discounted
rate is 9.75 percent.
The discounted rate will be the same for the two options.
Causes of Variation to expectations
Changes in taxes and government legislation.
Increased competition
Market changes due to consumption patterns.
Costs
The following costs will be incurred each year for the five year period:
The capital cost options will be: option A will be $ 100,000 while option B will be
$120,000
The total cost incurred during the period option A will be $10,000 and option B will be
$5,000
The variable cost will be as follows: option A will be $5,600 and option B will be $3,800
Evaluation of the costs will be done excluding data inflation.
The value of discounted dollar rate is 9.95 percent.
The net present value will be utilized in analysis of the two options as follows:
Option A
Initial
values
First year
Second
year
Third year
Fourth
year
Fifth year
maintenance
10,000
10,000
10,000
10,000
10,000
10,000
Variable cost
3,800
3,800
3,800
3,800
3,800
Fixed price
3500
3500
3500
3500
3500
3500
Capital cost
100,000
Discounted
factor
1.0
0.9877
0.9245
0.8245
0.80925
0.80000

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Running head: TENDER REPORT TO GOVERNMENT (THE COMPANY IS10) TENDER REPORT TO GOVERNMENT (THE COMPANY IS10) Name Institution 1 2 TENDER REPORT TO GOVERNMENT (THE COMPANY IS10) Price and cost assumptions The following assumption will be considered when comparing different service options:    The services will be offered for a period of five years There will be no major technological innovations during the evaluation but will be applied during the entire time of implementation. Costs incurred during a financial year are discounted at the rate that is applied at the end of the year. The service will be offered by a highly trained team by the firm. The cost of capital will be assumed to be 9.98 percent implying that the total discounted rate is 9.75 percent. The discounted rate will be the same for the two options.    Causes of Variation to expectations Changes in taxes and government legislation. Increased competition Market changes due to consumption patterns.    Costs The following costs will be incurred each year for the five year period:      The capital cost options will be: option A will be $ 100,000 while option B will be $120,000 The total cost incurred during the period option A will be $10,000 and option B will be $5,000 The variable cost will be as follows: option A will be $5,600 and option B will be $3,800 Evaluation of the costs will be done excluding data inflation. The value of discounted dollar rate is 9.95 ...
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