You are working on a bid to build two city parks a year for the next three
Question:
You are working on a bid to build two city parks a year for the next three years. This project requires the purchase of $273,000 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 half of what you paid for it. You will also need $23,000 in net working capital for the duration of the project. The fixed costs will be $64,500 a year and the variable costs will be $101,000 per park. Your required rate of return is 16 percent and your tax rate is 21 percent.
a. What is the depreciation per year? $
b. After-tax salvage value of equipment is: $
Financial Analysis with Microsoft Excel
ISBN: 978-1285432274
7th edition
Authors: Timothy R. Mayes, Todd M. Shank