Question
You are working on a bid to build two buildings a year for the next three years. This project requires the purchase of $250,000 of
You are working on a bid to build two buildings a year for the next three years. This project requires the purchase of $250,000 of equipment that will be depreciated using straight-line depreciation to a zero book value over the 3-year project life. The equipment can be sold at the end of the project for $45,000. You will also need $20,000 in net working capital for the duration of the project. The fixed costs will be $18,000 a year and the variable costs will be $168,000 per park. Your required rate of return is 15 percent and your tax rate is 34 percent. What is the minimal amount you should bid per building?
A. $158,237
B. $224,331
C. $285,341
D. $326,014
E. $234,279
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