You are working on a bid to build four small apartment buildings a year for the next three years for alocal community. This project requires the purchase of $900,000 of equipment which will bedepreciated at a CCA rate of 30% over the next three years. The equipment can be sold at the end ofthe project for $400,000 (ignore any gains or losses). You plan to borrow half of the equipment costat a rate of 5.5%. You will also need $200,000 in net working capital maintained over the life of theproject. The labour costs are expected to be $100,000 per year, fixed costs will be $175,000 a yearand the materials will be $140,000 per building per year. Your required rate of return is 12% for thisproject. Ignoring taxes, what is the minimal amount, that you should bid per building?

Rate of Return -: In finance, a return is an earning on an investment. It includes any modification…

s project requires the purchase of $900,000 of equipment which will be rate of 30% over the next three years. The equipment can be sold at the 00 (ignore any gains or losses). You plan to borrow half of the equipmer u will also need $200,000 in net working capital maintained over the life osts are expected to be $100,000 per year, fixed costs will be $175,000 a

s project requires the purchase of $900,000 of equipment which will be rate of 30% over the next three years. The equipment can be sold at the 00 (ignore any gains or losses). You plan to borrow half of the equipmer u will also need $200,000 in net working capital maintained over the life osts are expected to be $100,000 per year, fixed costs will be $175,000 a

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 16P

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