You Are Working on a Bid to Build Two Apartment

question 95

Multiple Choice

You are working on a bid to build two apartment buildings a year for the next 5 years for a local college.This project requires the purchase of $750,000 of equipment that will be depreciated using straight-line depreciation to a zero book value over the project's life.The equipment can be sold at the end of the project for $325,000.You will also need $140,000 in net working capital over the life of the project.The fixed costs will be $628,000 a year and the variable costs will be $1,298,000 per building.Your required rate of return is 14.5 percent for this project and your tax rate is 35 percent.What is the minimal amount,rounded to the nearest $100,you should bid per building?

• A)$1,423,700
• B)$1,489,500
• C)$1,733,000
• D)$2,780,600
• E)$3,465,900

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An equation between two variables that produces a straight line when plotted on a graph.

Linear Equation

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