FPIF QUESTION

Project Completed UNDER Target Cost

Using what we learned in class for FPIF and given the data below, what is the buyer payout to the seller?

$,$ Target Cost $$1,000K$

$,$ Target Fee $($Sellers Profit$)$ $$100K$

$,$ Target Price $$1,100K$

Ceiling Price $$1,200K($The maximum pay$-$out to the seller$)$

Share Ratio $70/30$

Actual Cost $$800K$

CPIF QUESTION Project Completed UNDER Target Cost

Using what we learned in class for CPIF and given the data below, what is the buyer payout to the seller?

$,$ Target Cost $$1,000K$

$,$ Target Fee $($Sellers Profit$)$ $$100K$

$,$ Target Price $$1,100K$

$,$ Ceiling Price $$1,200K($The maximum pay$-$out to the seller$)$

Share Ratio $\frac{85}{15}($buyer absorbs $85\%$ of the risk and the seller absorbs $15\%$ of the risk$)$

Actual Cost $$800K$