The local university is accepting bids for the hot dog and cold drink concession at the new stadium. The contract is for a 5 year period. You believe that a bid of $40,000 will win the contract. A preliminary analysis indicates that annual operating costs will be $35,000 and average annual sales will be $50,000. The contract can be written off during the 5 years. Taxes are at 40% rate, and your goal is to make a 20% return on your investment.
I have to use Excel to set up the problem and to find the solution with Excel.
A. Will you meet your goal if you use straight-line depreciation?
B. Would you meet your goal using sum-of-the -years' digits depreciation?
This solution analysis the profit made at a concession stand at a stadium.