You are working on a bid to build ten cabins a year for the next four years fo project requires the purchase of $215,000 of equipment which will be depre depreciation to a zero book value over four years. The equipment can be sc $149,001. You will also need $28,000 in net working capital for the life of the $22,000 a year and the variable costs will be $127,000 per cabin. Your requir project and your tax rate is 35%. What is the minimum amount, rounded to

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question

Please do not give solution in image format thanku 

You are working on a bid to build ten cabins a year for the next four years for a local campground. This
project requires the purchase of $215,000 of equipment which will be depreciated using straight-line
depreciation to a zero book value over four years. The equipment can be sold at the end of the project for
$149,001. You will also need $28,000 in net working capital for the life of the project. Your fixed costs will be
$22,000 a year and the variable costs will be $127,000 per cabin. Your required rate of return is 13% for this
project and your tax rate is 35%. What is the minimum amount, rounded to the nearest $100, you should
bid per cabin?
O a $135,600
Ob. $137,800
c. $134,900
Od. $133,700
Oe. $138,200
4
Transcribed Image Text:You are working on a bid to build ten cabins a year for the next four years for a local campground. This project requires the purchase of $215,000 of equipment which will be depreciated using straight-line depreciation to a zero book value over four years. The equipment can be sold at the end of the project for $149,001. You will also need $28,000 in net working capital for the life of the project. Your fixed costs will be $22,000 a year and the variable costs will be $127,000 per cabin. Your required rate of return is 13% for this project and your tax rate is 35%. What is the minimum amount, rounded to the nearest $100, you should bid per cabin? O a $135,600 Ob. $137,800 c. $134,900 Od. $133,700 Oe. $138,200 4
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 3 steps

Blurred answer
Knowledge Booster
Capital Budgeting
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education