What is the minimal amount should bid per park

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Problem 1: You are working on a bid to build two city parks a year for the next three years. This project requires the purchase of $249,000 of equipment that will be depreciated using straight-line depreciation to a zero book value over the three-year project life. Ignore bonus depreciation. The equipment can be sold at the end of the project for $115,000. You will also need $18,000 in net working capital for the duration of the project. The fixed costs will be $37,000 a year and the variable costs will be $148,000 per park. Your required rate of return is 14 percent and your tax rate is 21 percent. What is the minimal amount you should bid per park?

Reference no: EM132716015

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