You are working on a bid to build two city parks a year for the next three years. This project requires the purchase of $218,000 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 $65,000. You will also need $12,000 in net working capital for the duration of the project. The fixed costs will be $22,000 a year and the variable costs will be $342,000 total. Your required rate of return is 16 percent and your tax rate is 34 percent. What is the minimal amount you should bid per park? (Round your answer to the nearest $100)
Please explain.