You are working on a bid to build three amusement parks a year for the next two years. This project requires the purchase of $52,000 of equipment which will be depreciated using straight-line depreciation to a zero book value over two years. The equipment can be sold at the end of the project for $34,000. You will also need $16,000 in net working capital over the life of the project. The fixed costs will be $10,000 a year and the variable costs will be $70,000 per park. Your required rate of return is 10% for this project and your tax rate is 35%. What is the minimal amount, rounded to the nearest $500, you should bid per amusement park?

Answer rating: 100% (QA)

To find the minimal amount you should bid per amusement park we need to calculate the projects cash ... View the full answer