Monkey Business, an import business, builds special-order yachts. They decide to build one for a customer for
Question:
Monkey Business, an import business, builds special-order yachts. They decide to build one for a customer for at a cost $3,500,000. It will take 2 years (they start building in June 1, 2007) to build with total costs of $2,100,000: costs of $320,000 in 2007; $1,200,000 in 2008; and the remainder in 2009 (assume they stick to budget). The customer puts a deposit down of $500,000 and pays the remainder in 4 installments, each due every 6 months. For each year (2007, 2008, and 2009) compute the revenue expense, and gross profits reported for this construction project. Assume they do not have a written contract but based on this customer having purchased several yachts in the past, they believe he will pay for the boat in a timely manner. Determine what method to use and show all your work.
Fundamentals of Corporate Finance
ISBN: 978-1259024962
6th Canadian edition
Authors: Richard Brealey, Stewart Myers, Alan Marcus, Devashis Mitra, Elizabeth Maynes, William Lim