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You are the chief financial officer of a construction company called ExcellentBuilder which is interested in the following construction project: Four activities are involved - Name(Duration, Direct Cost): A(60days, $50,000), B(60days, $40,000), C(45days, $60,000), and D(60days, $30,000) Monthly indirect cost is $5000
You are the chief financial officer of a construction company called ExcellentBuilder which is interested in the following construction project: Four activities are involved - Name(Duration, Direct Cost): A(60days, $50,000), B(60days, $40,000), C(45days, $60,000), and D(60days, $30,000) Monthly indirect cost is $5000. ExcellentBuilder wants to have 25% markup. Retainage is 10% of all validated progress payments until one-half of the contract value. Payment requests are submitted at the end of each month, and payments are received one month later. ExcellentBuilder needs to finance the construction project from a line of credit (overdraft account) with an interest rate of one percent per month. The interest is charged at the end of each month. Deposit on the overdraft account does not generate interest benefit for the contractor. Logical relationships: • Activities B must begin at least 30 days after the start of activity A. Activity C must begin at least 15 days after the start of activity B. • Activities D must begin after the finish of activity A. . . a) Calculate the peak financial requirement for the contractor to know how much credit must be made available at the bank and develop the cash flow diagram. b) Generate the cash flow diagram and calculate the net present value with a monthly interest rate of 1%.
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