FINANCIAL MANAGEMENT OF CONSTRUCTION ORGANIZATIONS
1. An investor is considering buying some land for $100,000 and constructing an office building on it. Three different buildings are being analyzed.
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Building Height
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2 stories
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5 stories
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10 stories
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Cost of building (excluding cost of land)
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$400,000
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$800,000
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$2,100,000
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Resale value of land + building after 20-year horizon
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$200,000
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$300,000
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$400,000
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Annual net rental income
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$70,000
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$105,000
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$256,000
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(reduction value considered a reduction in cost - not a benefit.)
Using benefit-cost ratio analysis and an 8% MARR, determine which alternative, if any, should be selected.
2. The following invoices are being entered into the accounting system. What are the changes to the balance sheet and income statement for each invoice (show the changes using T tables)
a. A $5,000 invoice for concrete charged to a job (transaction completed)?
b. A $1,352 bill for office rent (transaction pending)
c. A $375 invoice for repairs to a backhoe (transaction completed)
3. What are the changes to the contractor's balance sheet and income statement as a result of billing a client $368,264 for a job (transaction pending). The bill includes $249,996 for work performed last month and $118,268 for the retention withheld from the previous month's payment. (show the changes using T tables)
4. Determine over- or under-billing for a company with the following information (use percent complete accounting method). How would the over- or under-billing affect the company's income statement and balance sheet (show the changes using T tables)? (10 points)
Job ID: 318
Job Name: Marker Street Warehouse
Current Contract Amount: $256,852
Total Estimated Cots at Completion: $225,236
Actual Cost to Date: $202,138
Total Billed: $252,253