Make per classroom and still turn economic profit

Assignment Help Financial Management

Reference no: EM131849476

Safety Third Construction Corp is bidding upon a service contract for Mizzou to maintain and upgrade three classrooms per year for the next nine years.

The contract will require purchasing $666,000 in equipment that will be depreciated using straight-line depreciation to a zero book value over the project's life. The equipment can be sold for $325,000 at the end of the service contract. They will also need $140,000 in net working capital over the life of the contract.

While performing the contract work, they expect to incur fixed costs of $500,000 per year and a variable cost of $124,000 per classroom. They will also face a corporate tax rate of 40%.

If the required rate of return is 15%, what is the minimum offer they can make per classroom and still turn an economic profit? (ROUND YOUR ANSWER TO 2 DECIMALS PLACES)

Reference no: EM131849476

Questions Cloud

What have been the most dominant economic policies : What have been the most dominant economic policies in the United states from the period of WW2 through the 2008 crisis

How you would apply the contingency theories : Discuss how you would apply the contingency theories as they relate to the healthcare work environment. How would you use these to assess the appropriate style.

Post a description and analysis of your favorite work of art : Post a description and analysis of your favorite work of art (painting) and explain your choice.

Identify if you would rather have a government dominated : Identify if you would rather have a government dominated by one party (unified government) that could get something done

Make per classroom and still turn economic profit : If the required rate of return is 15%, what is the minimum offer they can make per classroom and still turn an economic profit?

Identify an organism that lives within 50 miles of your home : Identify the structures and functions of the main organs found in your selected organism.

What are the qualifications of individuals in given fields : What are the qualifications of individuals in these fields (education, licensing/certification, experience); what is the average starting salary?

What would be a fair price for this stock today : If the required rate of return is 12% per year, what would be a fair price for this stock today?

What is overall charitable contribution deduction limitation : What is the overall charitable contribution deduction limitation? How are charitable contributions in excess of the current year’s limit treated?

User Account

All Pages