Question: A project is going on a bid to build two parks a year for the next three years. An equipment is required for this project
A project is going on a bid to build two parks a year for the next three years. An equipment is required for this project which costs $400,000. The method of the depreciation is straight-line depreciation to zero book value. Salvage value of the equipment after three years $100,000. Initial working capital requirement is $24,000. Annual fixed costs are $400,000 and variable costs for each park will be $250,000. The required rate of return that should be considered to evaluate this project is 15%. The company pays tax at 35%. Find the minimal amount company should bid for each park?
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