You are working on a bid to build 6 city parks a year for the...
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You are working on a bid to build 6 city parks a year for the next three years. This project requires the purchase of $1,000,000 of equipment that will be depreciated using straight-line depreciation to a zero book value over the three-year project life. The equipment can be sold at the end of the project for $15500. You will also need to invest $18,000 in net working capital for the duration of the project. The fixed costs will be $37,000 a year and the variable costs will be $148,000 per park. Your required rate of return is 14 percent and your tax rate is 21 percent.
What is the minimum bid price?
Assume you submit the minimum price at which you are willing to build the parks and your bid is accepted. Fill in the blanks below.
The NPV of the project is ______________.
The IRR of the project is ______________ .
The P.I. of the project is _______________.
You financially break even by producing __________ city parks.
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