Question

i am revising how did he get month 5?

19. You are planning to bid on a project. Your bid estimate cost is $300,000, and you include 15% profit for a total bid of $345,000. The owner will retain 5% on each payment. a. (5) Fill in the 5 boxes in month 3 in the cash flow chart below. Cash Pro Est Cost $300,000 Profit 15% Bid $ 345,000 Cost of $ 0.5% per month Invoice Date 5th of month Payment received 30 days later Retainage 5% EVERY month Interest Total Invoice Month 2 3 4 1910 Est. Cost $ 40,000 $ 80,000 $ 100,000 $ 80,000 $ $ 43,700 3 82400 $ 109,250 $ 104,650 $ Amt Rec'd $ . $ . $43700 $ 87,400 $ 109,250 $ 104,650 Cash Reg'd $ 40,000 $ 120,200 || 127.01_$170,587 $ 62,189 Interest $ 200 $ 6013886_ $ 853 $ 311 Total $ 40,200 $ 120,801 0177987 $171,439 $ 62,500 Profit $ 42,150 b. (3) After paying the interest, how much profit is there at the end of the job as a percent)? 42150 (14.05% 300,000 profit c. (2) Explain the Invoice of $104,650 in month 5 (either in words or by calculation).

Answer 1

The question is to be understood is three phases. First, how much invoice to be raised in the subsequent month following the job month. Second, how much I am supposed to receive the next month following the job month. Third, Cash reqd of subsequent month is total funds of previous month plus est cost of current month minus amt received in current month.

Month	1	2	3	4	5	6
Est cost	$ 40000	$ 80000	$ 100000	$ 80000	-	-
Invoice *	-	$ 43700	$ 87400	$ 109250	$ 104650	-
Amt received #	-	-	$ 43700	$ 87400	$ 109250	$ 104650
Cash reqd	$ 40000	$ 120200	$ 177101	$ 170587	$ 62190	-
Interest	$ 200	$ 601	$ 886	$ 853	$ 311	-
Total	$ 40200	$ 120801	$ 177987	$ 171440	$ 62501	-
Profit	-	-	-	-	-	42149

* Invoice is raised in the following way:

(Est cost of month + profit of 15%) x 95%

# Amt received for a month will be the same as invoice of previous month. The fact that the owner retains 5% of payment is already reflected in invoice raised.

For eg. the invoice for month 2 is $ 43700

$ 40000 ( est cost) + 15% (profit) = $ 46000

$ 46000 x 95% (retention by owner) = $ 43700

^ Cash reqd for current month is total column of previous month plus est cost of current month minus amt received for current month.

In month 2 cash reqd is total of previous month which is $ 40200 + est cost of current month which is $ 80000 less amt received in current month which is nil. Therefore, $ 120200.

c. In month 5 the invoice is raised in the following way:

Total cost of project plus 15% profit= $ 345000

Invoice raised from month 1 to 4 = $ 240350

Balance amount = $ 345000 - $ 240350 = $ 104650

The fact that the entire project cost is $ 345000 including profit, thus, I have to charge the entire amount during project work. Just because the owner is supposed to deduct 5% from payments does not make me charge any less than bid price.

b. Profit percent after paying interest:

$ 42149/$ 300000 x 100 = 14.05%