. You are working on a bid to build two city parks a year for the...

. You are working on a bid to build two city parks a year for the next three years. This project requires the purchase of $180,000 of equipment that will be depreciated using straight-line depreciation to a zero book value over the 3-year project life. The equipment can be sold at the end of the project for $34,000. You will also need $20,000 in net working capital for the duration of the project. The fixed costs will be $16,000 a year and the variable costs will be $168,000 per park. Your required rate of return is 15 percent and your tax rate is 34 percent. What is the minimal amount you should bid per park?

A. $72,500
B. $128,600
C. $154,300
D. $189,100
E. $217,600

Please give detailed explanation about how to get each value

Expert Solution

Annual after tax operating cost:
Fixed cost	16000
Variable cost	336000
Depreciation (180000/3)	60000
Total cost	412000
Less: Tax @ 34%	140080
After taxx cost	271920
Less: Dep	60000
Annual after tax cash outflows	211920

Annual after tax cash outflows	211920
Annuity PVF at 15% for 3yrs	2.28323
Present value of cash outflows		483862.1
Initial investment		180000
Investmemnt of WC		20000
Less: After tax salvage (34000-34%)*0.657516		14754.66
Less: Release of investment (20000*0.657516)		13150.32

Net present outflows		655957.1
Divide: Annuity PVF		2.28323
Annual after tax revenue		287293.5
Add: tax @ 34% (287293.5/66*34)		147999.7
Total revenue required		435293.2
Divide: Number of plots		2
Bid price per plot		217646.6

Answer is E 217600.

jeff jeffy answered 1 year ago

F- You are working on a bid to build two city parks a year for the...

F- 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...

You are working on a bid to build two city parks a year for the next...

You are working on a bid to build two city parks a year for the next three years. This project requires the purchase of $185,000 of equipment that will be depreciated using straight-line depreciation to a zero book value over the 3-year project life. The equipment can be sold at the end of the project for $34,000. You will also need $20,000 in net working capital for the duration of the project. The fixed costs will be $18,000 a year...

We are working on a project. Two companies have bid on the project and we are...

We are working on a project. Two companies have bid on the project and we are choosing from two machines. This is a mutually exclusive project, we must pick one machine or the other but cannot pick both. Machine A has an initial cost of $19,500 and a salvage value of $7500 (today's value) at the end of its 12 year life. Machine B has an initial cost of $17,900 and a salvage value of $2300 (today's value) at the...

The city maintains a landfill that has been recorded during the current year within its parks....

The city maintains a landfill that has been recorded during the current year within its parks. The landfill generated program revenues of $4,000 in Year 4 and cash expenses of $15,000. It also paid $3,000 cash for a piece of land. These transactions were recorded as would have been anticipated, but no other recording was made this year. The city assumes that it will have to pay $200,000 to clean up the landfill when it is closed in several years....

You are working on a bid for a contract. Thus far, you have determined that you...

You are working on a bid for a contract. Thus far, you have determined that you will need $156,000 for fixed assets and another $32,000 for net working capital at Time 0. You have also determined that you can recover $68,400 after-tax for the combined fixed assets and net working capital at the end of the 4-year project. What must be the annual operating cash flow each year, if the IRR of the project is 16 percent ? Select one:...

Imagine that you have been asked by Amazon to submit a bid to build, own and...

Imagine that you have been asked by Amazon to submit a bid to build, own and maintain a distribution facility on a remote offshore island off Northeast Canada. The island has a significant population, but no bridges to the mainland. Air and ferry services are very limited. Using economic terminology, discuss what sort of considerations you would take into account when considering the transactions costs associated with this project. What actions would you take to protect your investment should you...

Using the NPV bid price method, a construction firm submits a bid to build an apartment...

Using the NPV bid price method, a construction firm submits a bid to build an apartment building, wins the bid, and proceeds to complete the building. After the project is completed, the company's CFO is puzzled by the fact that the company lost money on the project. If the CFO used the correct method for calculating the NPV bid price , how could this have happened?

Build a program that calculates the parking fare for the customer who parks their cars in...

Build a program that calculates the parking fare for the customer who parks their cars in a public parking lot given the following: i. A character showing the type of vehicle: C for car, B for bus, T for truck ii. An integer between 0 and 24 showing the hour the vehicle entered the lot iii. An integer between 0 and 60 showing the minute the vehicle entered the lot iv. An integer between 0 and 24 showing the hour...

In working on a bid project you have determined that $318,000 of fixed assets will be...

In working on a bid project you have determined that $318,000 of fixed assets will be required and that they will be depreciated straight-line to zero over the 6-year life of the project. You have also determined that the discount rate should be 18 percent and the tax rate will be 35 percent. In addition, the annual cash costs will be $198,200. After considering all of the project’s cash flows you have determined that the required operating cash flow is...

The City of Pawnee, IN (not a real city) is planning to build a new hospital...

The City of Pawnee, IN (not a real city) is planning to build a new hospital next year that has a property value of $100 million. The Pawnee government plans to keep the property tax rate the same every year and to provide the same government services as they did last year. That is, the total budgeted expenditures and income from other sources will remain unchanged. Note: This question does not require any numerical calculations. Will the average amount of...

Question