A proposed project will require $410,000 in fixed assets that would be depreciated straight-line to zero over the 3-year life of the project.These assets have an expected aftertax salvage value of $110,000 at the end of the project.The project would require $48,000 of net working capital,all of which is recoverable,along with $220,000 in annual expenses.What is the minimum annual price you should bid on this project if you require a rate of return of 17 percent and have a tax rate of 30 percent?

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NPV = 0 = -$410,000 - 48,000 + OCF[(1 - 1 / 1.17³)/ 0.17] + ($110,000 + 48,000)/ 1.17³ OCF = $162,632.10 $162,632.10 = (Sales - $220,000)(1 - 0.30)+ ($410,000 / 3)(0.30) Sales = $393,760.15,or $393,760 The minimum annual price that should be bid is $393,760 based on the required return of 17 percent

A Proposed Project Will Require $410,000 in Fixed Assets That