PV CCATS Question Net Present Value

A company is bidding to build stadiums - 1 stadium per year, for 4 years.

They will need $25 million to purchase equipment initially, with expected salvage value equal to 35% of initial value.

Fixed costs per year = $10 million,

Variable costs = $5 million per stadium.

Assuming a tax rate of 20% and a required return of 15%, what is the minimum price per stadium at which you should accept the contract?

The PVCCATS method applies. The CCA rate is 25%.