Which one of the following statements is correct concerning bid prices?
A) The bid price is the maximum price that a firm should bid.
B) A firm can submit a bid that is higher than the computed bid price and still break even.
C) A bid price ignores taxes.
D) A bid price should be computed based solely on the operating cash flows of the project.
E) A bid price should be computed based on a zero percent required rate of return.

Question

Quizplus · Accepted Answer

The bid price is the maximum price that a firm should bid to break even. However, a firm can still submit a bid that is higher than the computed bid price and still break even, as long as the additional revenue covers the additional costs incurred. Therefore, statement B is correct. Statements A, C, D, and E are incorrect.

Which One of the Following Statements Is Correct Concerning Bid