Arlene Propane, a provider of propane and propane accessories is bidding on a contract to install propane
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Question:
- Arlene Propane, a provider of propane and propane accessories is bidding on a contract to install propane pumps and lines at 25 locations throughout Arlene township. The senior manager Mr. Hill anticipates that they will need to purchase $425,000 worth of equipment up front which will be depreciated at 30% for five years after which it can be salvaged for $185,000. Variable costs per installation are expected to be $62,500 per site. In addition to this they will be required to invest $100,000 in net working capital which they will recover at the end.
- The tax rate is 35% and the cost of capital is 15%. If the asset class remains open at the end of the project (ie the CCATS method may be used) What is the minimum bid price per site?
Related Book For
Fundamentals of Thermodynamics
ISBN: 978-0471152323
6th edition
Authors: Richard E. Sonntag, Claus Borgnakke, Gordon J. Van Wylen
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