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Find what is the minimum amount that mco should bid

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Reference no: EM132554718

Maju Construction (MCo) Sdn. Bhd. is bidding on a contract to build four tiny camping house (TCH) a year for the next three years for Sintokian campsite. Each TCH will be sold at the price of P. The project requires the purchase of RM132,000 of equipment which will be depreciated using simplified straight-line depreciation to a zero book value over the three years. The equipment can be sold at the end of the project for RM80,000. MCo will also need RM32,000 in net working capital over the life of the project. The fixed costs will be RM36,000 a year and the variable costs will be RM176,000 per TCH. MCo required rate of return is 14% for this project and the tax rate is 24%. Based on the information given: Calculate the initial outlay of the project.

Question i) Calculate the annual cash flows of the project.

Question ii) Calculate the annual cash flows of the project.

Question iii) Calculate the terminal cash flows of the project.

Question iv) What is the minimum amount that MCo should bid per TCH if the company required NPV of RM20,000 on this project?

Reference no: EM132554718

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