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You are working on a bid to build two city parks a year for the next three years. This project requires the purchase of $180,000 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 $34,000. You will also need $20,000 in net working capital for the duration of the project. The fixed costs will be $16,000 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 40 percent.

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Question: What is the minimal amount you should bid per park?

Note: Show step by step solution and I also want complete calculation.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91173680

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