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Monsoon Inc. is considering bidding on a government project. To do the project, the company must...

Monsoon Inc. is considering bidding on a government project. To do the project, the company must make an initial investment of $8 million to purchase the necessary equipment. The project will last for five years, at the end of which the equipment can be salvaged for $500,000. The equipment has a CCA rate of 30%. The bidding process for the project requires the firm to submit a bid for a constant amount of $X before-tax, to be remitted by the government to the winning bidder each year. The firm’s marginal tax rate is 40%, and the required rate of return on similar projects is 18%. What is the minimum bid that the firm should submit for this project? Round your answer to the nearest dollar.

Select one:

a. $8,000,000
b. $3,191,717
c. $1,915,030
d. $3,308,198
e. $5,988,626

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Answer #1

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ANSWER : b : $3,191,717

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