You are working on a bid to build two city parks a year for the next...

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You are working on a bid to build two city parks a year for thenext three years. This project requires the purchase of $185,000 ofequipment that will be depreciated using straight-line depreciationto a zero book value over the 3-year project life. The equipmentcan be sold at the end of the project for $34,000. You will alsoneed $20,000 in net working capital for the duration of theproject. The fixed costs will be $18,000 a year and the variablecosts will be $168,000 per park. Your required rate of return is 15percent and your tax rate is 34 percent. What is the minimal amountyou should bid per park? (Round your answer to the nearest$100)
show work please I have no idea how to do this

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3.9 Ratings (674 Votes)

Time line 0 1 2 3 Cost of new machine 185000 Initial working capital 20000 Initial Investment outlay 205000 0 0 0 Variable operating cost 168000 168000 168000 Fixed cost 18000 18000 18000 Depreciation Cost of equipmentno of years 6166667 61666667 See Answer

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You are working on a bid to build two city parks a year for thenext three years. This project requires the purchase of $185,000 ofequipment that will be depreciated using straight-line depreciationto a zero book value over the 3-year project life. The equipmentcan be sold at the end of the project for $34,000. You will alsoneed $20,000 in net working capital for the duration of theproject. The fixed costs will be $18,000 a year and the variablecosts will be $168,000 per park. Your required rate of return is 15percent and your tax rate is 34 percent. What is the minimal amountyou should bid per park? (Round your answer to the nearest$100)show work please I have no idea how to do this