You Are Working on a Bid to Build Three Amusement

question 289

Multiple Choice

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 the 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?

• A) $20,000
• B) $66,500
• C) $68,000
• D) $74,000
• E) $79,500

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