Subcontractor Finance Assingment Help With Solution

Posted on May 6, 2017

Subcontractor Finance Assingment Help With Solution

 
The construction company in Problem 1 decides to act as the owner on the project. The construction company will be paid $500,000 for the project at the end of the seventh month. In addition to the construction costs, the construction company has the following soft costs: land purchase, $150,000; engineering and design fees, $15,000; building permits, $3,000; government fees, $5,000; and other miscellaneous costs, $10,000. The soft costs will be paid at the end of month zero. The construction company pays material suppliers in full on the last day of the month following the month the materials were supplied to the project. The subcontractors will be paid on the same schedule as the suppliers; however, the construction company will withhold 5% retention from the subcontractors’ payments, which will be paid to the subcontractors at the end of the seventh month. The construction company pays for labor weekly. Determine the monthly cash flows and total cash generated by the project at the end of each month and just before the payment is received. What is the maximum amount of cash invested by the company during the completion of the project?
 

The construction company in Problem 2 decides to act as the owner on the project. The construction company plans to sell the project for $1,250,000 at the end of the seventh month. In addition to the construction costs the construction company has the following soft costs: land purchase, $250,000; engineering and design fees, $30,000; building permits, $7,000; government fees, $15,000; and other miscellaneous costs, $10,000. The soft costs will be paid at the end of month zero. The construction company pays material suppliers in full on the fifteenth day of the month following the month the materials were supplied to the project. For example, materials supplied during the first month will be paid for on the fifteenth of the second month. The subcontractors will be paid on the same schedule as the suppliers; however, the construction company will withhold 10% retention from the subcontractors’ payments, which will be paid to the subcontractors on the fifteenth day of the seventh month. The construction company pays for labor weekly. Determine the monthly cash flows and total cash generated by the project at the end of each month and just before the payment is received. What is the maximum amount of cash invested by the company during the completion of the project?

 

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Set up a spreadsheet to solve Problem 1.
Problem 1 A construction company is negotiating on a construction project with a six month duration. On the last day of each month the construction company may bill the owner for the work completed during the month. The owner pays the monthly bills one month after they are received. The owner also holds a 5% retention. Final payment is expected one month after completion of the project and includes payment of the retention. The construction company pays material suppliers in full when it receives payment from the owner. The construction company pays subcontractors when it receives payment from the owner but withholds 5% retention from the subcontractor’s payment. The construction company pays for labor weekly. The projected monthly material, labor, and subcontractor costs as well as the amount the construction company will bill the project’s owner each month are shown in the following table. Determine the monthly cash flows and the total cash generated by the project at the end of each month and just before each payment is received from the project’s owner. What is the maximum amount of cash invested by the company during the completion of the project?
 

 

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