Maria Kichner is preparing to bid for a project. She has made her cost estimate together with the schedule of work. Her expected expenses and their time occurrence are as shown in the following table. For simplicity of analysis she assumed that all expenses are recognized at the end of the month in which they occur.

a. Kirchner is planning to add 10% to her estimated expenses to cover profits and office expenses. The total will be her bid price. She is also planning to submit for this progress payment at the end of each month. Upon approval, the owner will subtract 5% for retainage and pay the contractor one month later. The accumulated retainage will be paid to the contractor with the last payment (i.e., end of month 13).

i. Develop the cash flow diagram.

ii. What is the peak financial requirement and when does it occur?

b. Assume the same as in part (a), except that the owner will retain 10% instead of 5%. Plot the cash flow diagram and calculate the peak financial requirement.

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Month 0 1 2 3 4 5 6 7 8 9 10 11 12 Total Mobilization Demobilization $40,000 0 0 0 0 0 0 0 0 0 0 0 20,000 $60,000 Subcontractors $0 10,000 30,000 30,000 40,000 50,000 50,000 40,000 40,000 70,000 30,000 30,000 50,000 $470,000 Materials $0 10,000 20,000 30,000 30,000 40,000 40,000 30,000 10,000 10,000 5,000 5,000 0 Payroll $0 10,000 15,000 20,000 20,000 40,000 40,000 40,000 20,000 10,000 5,000 5,000 5,000 $230,000 Total cost = $60,000+ $470,000+$230,000+$230,000+ $165,000+ $65,000+ $1,220,000 Profits + overhead 10% = $122,000 Bid price = $1,342,000 $230,000 Equipment $0 20,000 10,000 20,000 30,000 20,000 15,000 10,000 10,000 10,000 10,000 5,000 5,000 $165,000 Field Overhead $0 1,000 5,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 5,000 $65,000