Construction Accounting And Financial Management (4th Edition)
4th Edition
ISBN: 9780135232873
Author: Steven J. Peterson MBA PE
Publisher: PEARSON
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Chapter 12, Problem 10P
To determine
Ascertain the monthly cash flow, the total cash and the maximum amount invested during the remaining months of the project by the company.
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Three construction jobs are being considered by Clam City Construction (see the accompanying table). Each
is characterized by an initial deposit paid by the client to Clam City Construction (CCC), a yearly cost incurred
by CCC at the end of each of three years, and a final payment to CCC by the client at the end of three years.
CCC has the capacity to do only one of these contracts. Use an appropriate rate of return method to
determine which it should choose. The company's MARR is 10 percent.
Job
1
2
3
Deposit
$100,000
$130,000
$145,000
Cost per Year
$75,000
$100,000
$150,000
Final Payment
$195,000
$240,000
$350,000
with an
Considering the jobs in order of lowest first cost, the best option is
incremental rate of return of
percent.
(Round to one decimal place as needed. Use an approximate ERR if the IRR cannot be used.)
Consultant Inc. is a firm of consulting engineers, newly established to advise on a large project taking three years to complete. Their fee for this work is a percentage of the total project costs, payable on completion of the project. In the interim, advances on the final fee are made at six-monthly intervals. The total project costs will not be known until the project is completed. The following advances were received by Consultant Inc. during the three-year period:
Year ended 31 December 20x0 K25, 000
Year ended 31 December 20x1 K30, 000
Year ended 31 December 20x2 K30, 000
When the total costs were computed during the year ended 31 December 20x0, it was found that a further sum of K50, 000 was due to Consultant Inc.
REQUIRED;
Explain how Consultant Inc. would show the payments made during the periods covered by the project. Justify your explanation…
Start up expenses:
To start the gym, the initial total investment required is $162,544.55EC. This figure includes all operational costs for the first month, including equipment costs, legal fees for drafting partnership contracts, business registration fees, renovation costs for painting the space and installing fixtures, mirrors, front desk etc. This figure also includes all operational costs for the next six months which is comprised mostly of rent and salaries. Between January and June 2022, the gym is expected to generate a loss since it is a new entity and therefore the partners have found it necessary to have enough capital on to cover the expenses for these months. To attain a loan from the National Bank of Dominica Ltd, at least 10% equity and 20% collateral is required. Therefore, all five partners have come to the agreement to each invest $18,000 EC. Cumulatively, equity in the business would be $90,000. This equity will fully cover the cost of equipment ($58,544.28c) which…
Chapter 12 Solutions
Construction Accounting And Financial Management (4th Edition)
Ch. 12 - Prob. 1DQCh. 12 - How does subcontracting out labor that would...Ch. 12 - Prob. 3DQCh. 12 - Prob. 4DQCh. 12 - How does the rate of progress on a project affect...Ch. 12 - How does retention affect the projects need for...Ch. 12 - Prob. 7DQCh. 12 - A construction company is negotiating on a...Ch. 12 - A construction company is negotiating on a...Ch. 12 - Prob. 10P
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