Last year your construction company built a 93,580 sf warehouse for $8,513,882. The owner wants to build another warehouse of similar size; this time the owner wants to add 1,164 sf of office space in one corner of the building. It is estimated that the offices space will cost $117,970 and that costs have risen 2.7 percent during the last year. Using this information, prepare a preliminary estimate for the new warehouse.

Last year your construction company built a 93,580 sf warehouse for $8,513,882. The owner wants to build another warehouse of similar size; this time the owner wants to add 1,164 sf of office space in one corner of the building. It is estimated that the offices space will cost $117,970 and that costs have risen 2.7 percent during the last year. Using this information, prepare a preliminary estimate for the new warehouse.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

ABC Corporation has hired you to evaluate a new FOUR year project for the firm. The project will require the purchase of a $843,200.00 work cell. Further, it will cost the firm $51,700.00 to get the work cell delivered and installed. The work cell will be straight-line depreciated to zero with a 20-year useful life. The project will require new employees to be trained at a cost of $59,100.00. The project will also use a piece of equipment the firm already owns. The equipment has been fully depreciated, but has a market value of $5,200.00. Finally, the firm will invest $10,800.00 in net working capital to ensure the project has sufficient resources to be successful. The project will generate annual sales of $917,000.00 with expenses estimated at 38.00% of sales. Net working capital will be held constant throughout the project. The tax rate is 40.00%. The work cell is estimated to have a market value of $489,000.00 at the end of the fourth year. The firm expects to reclaim 85.00% of the…
You are an employee of University Consultants, Limited, and have been given the following assignment. You are to present an investment analysis of a small retail income-producing property for sale to a potential investor. The asking price for the property is $1,430,000; rents are estimated at $183,040 during the first year and are expected to grow at 2.5 percent per year thereafter. Vacancies and collection losses are expected to be 10 percent of rents. Operating expenses will be 35 percent of effective gross income. A fully amortizing 70 percent loan can be obtained at 8 percent interest for 30 years (total annual payments will be monthly payments × 12). The property is expected to appreciate in value at 4 percent per year and is expected to be owned for five years and then sold. Required: a. What is the first-year debt coverage ratio? b. What is the terminal capitalization rate? c. What is the investor's expected before-tax internal rate of return on equity invested (BTIRR)? d. What…
The Chief Operations Officer (COO) of a manufacturing firm recommends one of the manufacturing sites to undergo a process improvement initiative. He claims that this project will enable the company to realize a net savings of at least $3.25 Mln. The Chief Financial Officer (CFO) of the company tasked you to conduct a financial analysis to verify the claims of the COO. After performing cost analysis, you estimated that the project will require an initial investment of $2 Mln today and $1 Mln in Year 1. Afterwards, the initiative will yield an annual cost savings of $850k from Year 2 to Year 10. You assume that these cost savings are realized at the end of each year. (a) Suppose that you use a discount rate of 5%. Will the resulting net savings support the claim of the COO? (b) Determine the Internal Rate of Return (IRR) of the process improvement initiative. (c) Show the NPV profile of the project.
You are an employee of University Consultants, Limited, and have been given the following assignment. You are to present an investment analysis of a small retail income-producing property for sale to a potential investor. The asking price for the property is $1,360,000; rents are estimated at $174,080 during the first year and are expected to grow at 2.5 percent per year thereafter. Vacancies and collection losses are expected to be 10 percent of rents. Operating expenses will be 35 percent of effective gross income. A fully amortizing 70 percent loan can be obtained at 6 percent interest for 30 years (total annual payments will be monthly payments × 12). The property is expected to appreciate in value at 3 percent per year and is expected to be owned for five years and then sold. Required: a. What is the first-year debt coverage ratio? b. What is the terminal capitalization rate? c. What is the investor’s expected before-tax internal rate of return on equity invested (BTIRR)? d.…
A shelve manufacturer is developing a plan for the following two years. The question iswhether to lease a large workshop space with highproduction capacity or two workshop spaces with a smaller capacity. The initial cost to lease a large workshop space is equal tothe total cost of leasing two smaller ones. If the large workshop space is leased and customer demand is high, then NPV is $8,500,000 annually. If the large workshop is leased and customer demand is low, then NPV is$4,500,000. If two small workshops are leased and demand is low, the total NPV is $6,500,000 but if they experience high demand, the total NPV of two small offices will be $8,000,000.Some studies have been done on market dynamic and the market expert suggested that the likelihood of high demand is 0.7.Use the above information to determine which option returns the best NPV outcome in thetwo-year period.The rate of return is 0.1.
Briggs Excavation Company is planning an investment of $932,100 for a bulldozer. The bulldozer is expected to operate for 3,000 hours per year for eight years. Customers will be charged $140 per hour for bulldozer work. The bulldozer operator costs $32 per hour in wages and benefits. The bulldozer is expected to require annual maintenance costing $30,000. The bulldozer uses fuel that is expected to cost $42 per hour of bulldozer operation. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402 2.283 2.106 4 3.465 3.170 3.037 2.855 2.589 5 4.212 3.791 3.605 3.352 2.991 6 4.917 4.355 4.111 3.784 3.326 7 5.582 4.868 4.564 4.160 3.605 8 6.210 5.335 4.968 4.487 3.837 9 6.802 5.759 5.328 4.772 4.031 10 7.360 6.145 5.650 5.019 4.192 a. Determine the equal annual net cash flows from operating the bulldozer. Use a minus sign to indicate cash outflows.…
Your IT company is working on a four-month project for a local mining company. The total planned value of the project (BAC) is $600,000. You are at the end of month three. By the end of month three you scheduled to spend $500,000(PV). The actual cost through this three-month mark is $450,000 (AC). The total work completed at the end of month three is 94 percent. Calculate the earned value, EV=
You are an employee of University Consultants, Limited, and have been given the following assignment. You are to present an investment analysis of a small retail income-producing property for sale to a potential investor. The asking price for the property is $1,430,000; rents are estimated at $183,040 during the first year and are expected to grow at 2.5 percent per year thereafter. Vacancies and collection losses are expected to be 10 percent of rents. Operating expenses will be 35 percent of effective gross income. A fully amortizing 70 percent loan can be obtained at 8 percent interest for 30 years (total annual payments will be monthly payments × 12). The property is expected to appreciate in value at 4 percent per year and is expected to be owned for five years and then sold. Required: a. What is the first-year debt coverage ratio? b. What is the terminal capitalization rate? c. What is the investor’s expected before-tax internal rate of return on equity invested (BTIRR)? d. What…
Please show work
You are an employee of University Consultants, Limited, and have been given the following assignment. You are to present an investment analysis of a small retail income-producing property for sale to a potential investor. The asking price for the property is $1,350,000; rents are estimated at $172,800 during the first year and are expected to grow at 2.5 percent per year thereafter. Vacancies and collection losses are expected to be 10 percent of rents. Operating expenses will be 35 percent of effective gross income. A fully amortizing 70 percent loan can be obtained at 7 percent interest for 30 years (total annual payments will be monthly payments × 12). The property is expected to appreciate in value at 3 percent per year and is expected to be owned for five years and then sold. Required: a. What is the first-year debt coverage ratio? b. What is the terminal capitalization rate? c. What is the investor’s expected before-tax internal rate of return on equity invested (BTIRR)? d.…
Your first job as an engineer is to purchase a new rotary vacuum-drum filter with a capacity of 1100 ft-. Your company purchased a similar filter eight years ago with a capacity of 700 ft- for $26,000. After checking the literature, you determine the cost index was 429 eight years ago and is 548 today. If the power-sizing exponent for this type of equipment is 0.52, estimate the cost of the new filter.
You are an employee of University Consultants, Limited, and have been given the following assignment. You are to present an investment analysis of a small retail income-producing property for sale to a potential investor. The asking price for the property is $1,400,000; rents are estimated at $179,200 during the first year and are expected to grow at 2.5 percent per year thereafter. Vacancies and collection losses are expected to be 10 percent of rents. Operating expenses will be 35 percent of effective gross income. A fully amortizing 70 percent loan can be obtained at 8 percent interest for 30 years (total annual payments will be monthly payments 12). The property is expected to appreciate in value at 3 percent per year and is expected to be owned for five years and then sold. Required: a. What is the first-year debt coverage ratio? b. What is the terminal capitalization rate? c. What is the investor's expected before-tax internal rate of return on equity invested (BTIRR)? d. What is…