Question: Table 1 shows the estimated early start direct cost distribution of a simple project performed under a lump sum contract for 4 months. The project
Table 1 shows the estimated early start direct cost distribution of a simple project performed under a lump sum contract for 4 months. The project also accumulates a constant indirect cost of $5, 000 per month. You want to use a markup of 15% and the contract states that the retainage throughout the project is 10%. All payments are billed at the end of the month and received after one month of review period. The owner also agreed to advance a 57, 000 mobilization payment at the beginning of the project:o be decreased from the last payment Assuming the finance charge is 2% per month and the monthly expected cost of the project is borrowed at the beginning of each month; What is the balance (in the contractor's pocket) at the end of month 5? Is this an economically feasible project for the contractor, if his/her MARR (minimum acceptable rate of return is 8%? Why? Assume that at the end of month 3 you receive a memo from the supervisor of activity C stating the cost of the activity will increase by $5, 000 in month 4. This increase will have no effect on the indirect cost. Is this still an economically feasible project based on the MARR
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