You Are Working on a Bid to Build Ten Cabins

question 122

Multiple Choice

You are working on a bid to build ten cabins a year for the next four years for a local campground. This project requires the purchase of $215,000 of equipment which will be depreciated using
Straight-line depreciation to a zero book value over four years. The equipment can be sold at the
End of the project for $149,001. You will also need $28,000 in net working capital for the life of the
Project. Your fixed costs will be $22,000 a year and the variable costs will be $127,000 per cabin.
Your required rate of return is 13% for this project and your tax rate is 35%. What is the minimum
Amount, rounded to the nearest $100, you should bid per cabin?

• A) $133,700
• B) $134,900
• C) $135,600
• D) $137,800
• E) $138,200

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Definitions:

A-not-B Effect

A cognitive error observed in infants, where they will repeatedly reach for an object at a location (A) where it was previously found, despite seeing it moved to a new location (B).

Demonstrate

To show or prove something clearly through evidence or arguments.

Mature Concept

A fully developed and comprehensive understanding or idea that has been refined and thoughtfully considered over time.

Physically Impossible

An action, event, or process that cannot occur or be achieved within the realms of natural laws and physical constraints.