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The owner of a small pipeline construction company wants to determine how much he should bid in his attempt to win his first “big” contract. He estimates that his cost to complete the project will be $8.5 million in PW equivalency. He wants to bid an amount that will generate an after-tax rate of return of 19% per year; however, he doesn’t know how much to bid on a before-tax basis. He told you that his effective state tax rate is 9% and his effective federal tax rate is 24% per year. How much should he bid? The owner should bid _____ $ million.

The owner of a small pipeline construction company wants to determine how much he should bid in his attempt to win his first “big” contract. He estimates that his cost to complete the project will be $8.5 million in PW equivalency. He wants to bid an amount that will generate an after-tax rate of return of 19% per year; however, he doesn’t know how much to bid on a before-tax basis. He told you that his effective state tax rate is 9% and his effective federal tax rate is 24% per year. How much should he bid? The owner should bid _____ $ million.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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The owner of a small pipeline construction company wants to determine how much he should bid in his attempt to win his first “big” contract. He estimates that his cost to complete the project will be $8.5 million in PW equivalency. He wants to bid an amount that will generate an after-tax rate of return of 19% per year; however, he doesn’t know how much to bid on a before-tax basis. He told you that his effective state tax rate is 9% and his effective federal tax rate is 24% per year. How much should he bid? The owner should bid _____ $ million.

 

ANSWER WAS NOT 10.83 MILLION 

Note: Don't use chat gpt. 

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