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Question
You are working on a bid to build two apartment buildings a year for the next three years. This project requires the purchase of $847,000 of equipment that will be depreciated using straight-line depreciation to a zero book value over the project's life. Ignore bonus depreciation. The equipment can be sold at the end of the project for $415,000. You will also need $165,000 in net working capital over the life of the project. The fixed costs will be $528,000 a year and the variable costs will be $1,640,000 per building. Your required rate of return is 16 percent for this project and your tax rate is 24 percent. What is the minimal amount, rounded to the nearest $100, you should bid per building?
A) $4,158,400
B) $4,489,500
C) $2,065,700
D) $2,780,600
E) $2,244,800
Answer
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Related questions
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Q:
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Q:
Which one of the following statements is correct concerning the NYSE?
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B) general partnerships.
C) limited partnerships.
D) corporations.
E) limited liability companies.
Q:
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A) managers
B) internal auditors
C) external legal counsel
D) internal legal counsel
E) Securities and Exchange Commission agent
Q:
Decisions made by financial managers should primarily focus on increasing the:
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B) growth rate of the firm.
C) gross profit per unit produced.
D) market value per share of outstanding stock.
E) total sales.
Q:
A partnership with four general partners:
A) distributes profits based on percentage of ownership.
B) has an unlimited partnership life.
C) limits the active involvement in the firm to a single partner.
D) limits each partner's personal liability to 25 percent of the partnership's total debt.
E) must distribute 25 percent of the profits to each partner.
Q:
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A) the receipt of tax-free income.
B) the partner's active participation in the firm's activities.
C) the lack of any potential financial loss.
D) the daily control over the business affairs of the partnership.
E) the partner's maximum loss is limited to their capital investment.
Q:
Which one of the following statements concerning a sole proprietorship is correct?
A) A sole proprietorship is designed to protect the personal assets of the owner.
B) The profits of a sole proprietorship are subject to double taxation.
C) The owner of a sole proprietorship is personally responsible for all of the company's debts.
D) There are very few sole proprietorships remaining in the U.S. today.
E) A sole proprietorship is structured the same as a limited liability company.
Q:
Which one of the following questions is least likely to be addressed by financial managers?
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B) Should customers be given 30 or 45 days to pay for their credit purchases?
C) Should the firm borrow more money?
D) Should the firm acquire new equipment?
E) How much cash should the firm keep on hand?
Q:
An example of a capital budgeting decision is deciding:
A) how many shares of stock to issue.
B) whether or not to purchase a new machine for the production line.
C) how to refinance a debt issue that is maturing.
D) how much inventory to keep on hand.
E) how much money should be kept in the checking account.
Q:
The date on which a shareholder is officially listed as the recipient of stock rights is called the:
A) issue date.
B) offer date.
C) declaration date.
D) holder-of-record date.
E) ex-rights date.