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
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1. A contractor is constructing a project for which he will be paid in one lump sum upon satisfactory completion of the project. The contractor needs cash to finance the construction and opens a line of credit at their bank (the loan would be repaid at the end of the project). The construction project is expected to last 16 months, and the contractor expects to borrow $100,000 at the beginning of the first month, and at the end of each of the first six months, making a total borrowing of $700,000. The contractor then needs to borrow $250,000 per month at the end of month 7 through 16, for an additional $2,500,000. The owner agrees to pay the contractor the lump sum payment for the project at EOM 20, at which time the contractor will repay the bank. Interest on the contractors outstanding loan balance is 1.5% per month for the first 10 months and then 2% per month until EOM 20. Given this scenario, please answer the following questions.
a. What is the minimum contract price for this…
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…
To provide for the automation of a production process in six years, Invista is starting a
sinking fund to accumulate $800,000 by the end of the six years. Round the sinking fund
payments and the periodic interest earnings to the nearest dollar. If the sinking fund earns
6.4% compounded monthly, what month end payments should be made to the fund? In
what month will the fund pass the halfway point?
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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- To provide for the automation of a production process in five years, Dominion Chemicals is starting a sinking fund to accumulate $600,000 by the end of the five years. Sinking fund payments are to be made at the beginning of every month. Round the sinking fund payments and the periodic interest earnings to the nearest dollar.a) If the sinking fund earns 7.5% compounded monthly, what monthly payments starting today should be made to the fund? b) How much interest will be earned in the fourth year? c) In what month will the fund pass the halfway point? d) How much interest will be earned in the 35th month?arrow_forwardYou are assessing the minimum amount of investment that you will be willing to invest today for a billboard construction project. The useful life of the steel structure is 10 years. Monthly advertising space rental costs P120,000. Advertising contracts requires prepayment of the lease before commencing the rental. Rental revenue will be deposited in a deposit account with 2.5% interest rate, compounded quarterly. What is the minimum amount of investment for the billboard steel foundation today?arrow_forwardClick to see additional instructions To provide funding for a particular project, a company decides to go for a loan worth GHC 200,000. The loan is to be paid at an interest rate of 18% per year in six annual installments starting from the beginning of the second year. The size of the equal payment needed each year is GHSarrow_forward
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