Question

A construction and development project has estimated expenses that start today for $3,000,000. The expenses decrease...

A construction and development project has estimated expenses that start today for $3,000,000. The expenses decrease at 10% per month after the first expense. The construction starts today and finishes after 24 expenses. The expenses are the land acquisition, development cost charges, consultants’ costs, marketing costs, construction costs, and other costs. The project revenues consist of selling the first luxury homes during the months 26 to 30 at the same equal price per month, X. The other stream of revenues consist of selling the rest of the units at month 33 at $2,600,000 and then increasing at 5% after month 33 for 6 additional months. If the expected return of the construction and development investment is 1.65% per month, what is the value (X) of the units during the months 26 to 30?

Create cash flow diagram.

Homework Answers

Answer #1

In case, the cost of capital is r, we've,

NPV of total expenses: -

On solving, we've: -

NPV of total expenses: -

Also, NPV of total revenues: -

Putting in r = 1.65%, and equating the NPVs, X = 1,622,800.09

Cash flow diagram is shown in the figure below.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
1. Alpha Ltd has appointed you as a manager in the budgeting department. The company has...
1. Alpha Ltd has appointed you as a manager in the budgeting department. The company has provided the following information to prepare a cash flow budget for the six months from the 1 January 2021 to 30 June 2021. Alpha Ltd produces only one type of product and the projected selling price of the product is £2 for January and February and after that will be fixed at £3 for the foreseeable future.     For the first three months of the...
A construction company has obtained a contract for a highway project and will need to lease...
A construction company has obtained a contract for a highway project and will need to lease an additional road grader for a month to fill out its equipment fleet. The company is trying to decide between two different lease options for the grader: 1) lease an older grader for $8,500, or 2) lease a newer grader for $10,000. The newer grader is still under warranty, so the lease cost covers all repair expenses. However, the company would be responsible for...
Flexible Budget for Selling and Administrative Expenses for a Service Company Morningside Technologies Inc. uses flexible...
Flexible Budget for Selling and Administrative Expenses for a Service Company Morningside Technologies Inc. uses flexible budgets that are based on the following data: Sales commissions 7% of sales Advertising expense 25% of sales Miscellaneous administrative expense $1,850 per month plus 3% of sales Office salaries expense $17,000 per month Customer support expenses $2,600 plus 4% of sales Research and development expense 5,750 per month Prepare a flexible selling and administrative expenses budget for April for sales volumes of $115,000,...
Andretti Company has a single product called a Dak. The company normally produces and sells 88,000...
Andretti Company has a single product called a Dak. The company normally produces and sells 88,000 Daks each year at a selling price of $60 per unit. The company’s unit costs at this level of activity are given below: Direct materials $ 9.50 Direct labor 10.00 Variable manufacturing overhead 2.70 Fixed manufacturing overhead 6.00 ($528,000 total) Variable selling expenses 2.70 Fixed selling expenses 3.00 ($264,000 total) Total cost per unit $ 33.90 A number of questions relating to the production...
Pistachio Company has a single product called a Dak. The company normally produces and sells 81,000...
Pistachio Company has a single product called a Dak. The company normally produces and sells 81,000 Daks each year at a selling price of $56 per unit. The company’s unit costs at this level of activity are given below: Direct materials $ 7.50 Direct labor 10.00 Variable manufacturing overhead 2.50 Fixed manufacturing overhead 10.00 ($810,000 total) Variable selling expenses 2.70 Fixed selling expenses 2.50 ($202,500 total) Total cost per unit $ 35.20 Due to a strike in its supplier’s plant,...
Andretti Company has a single product called a Dak. The company normally produces and sells 88,000...
Andretti Company has a single product called a Dak. The company normally produces and sells 88,000 Daks each year at a selling price of $60 per unit. The company’s unit costs at this level of activity are given below: Direct materials $ 7.50 Direct labor 10.00 Variable manufacturing overhead 2.80 Fixed manufacturing overhead 9.00 ($792,000 total) Variable selling expenses 2.70 Fixed selling expenses 3.00 ($264,000 total) Total cost per unit $ 35.00 A number of questions relating to the production...
Andretti Company has a single product called a Dak. The company normally produces and sells 82,000...
Andretti Company has a single product called a Dak. The company normally produces and sells 82,000 Daks each year at a selling price of $46 per unit. The company’s unit costs at this level of activity are given below: Direct materials $ 6.50 Direct labor 9.00 Variable manufacturing overhead 2.50 Fixed manufacturing overhead 4.00 ($328,000 total) Variable selling expenses 2.70 Fixed selling expenses 4.50 ($369,000 total) Total cost per unit $ 29.20 A number of questions relating to the production...
Need Assitance with 2, 4A and 5. Filled in other anserws in bold. Andretti Company has...
Need Assitance with 2, 4A and 5. Filled in other anserws in bold. Andretti Company has a single product called a Dak. The company normally produces and sells 87,000 Daks each year at a selling price of $56 per unit. The company’s unit costs at this level of activity are given below: Direct materials $ 6.50 Direct labor 8.00 Variable manufacturing overhead 3.80 Fixed manufacturing overhead 10.00 ($870,000 total) Variable selling expenses 1.70 Fixed selling expenses 2.50 ($217,500 total) Total...
Andretti Company has a single product called a Dak. The company normally produces and sells 88,000...
Andretti Company has a single product called a Dak. The company normally produces and sells 88,000 Daks each year at a selling price of $56 per unit. The company’s unit costs at this level of activity are given below: Direct materials $ 9.50 Direct labor 9.00 Variable manufacturing overhead 1.90 Fixed manufacturing overhead 6.00 ($528,000 total) Variable selling expenses 2.70 Fixed selling expenses 4.50 ($396,000 total) Total cost per unit $ 33.60 A number of questions relating to the production...
Andretti Company has a single product called a Dak. The company normally produces and sells 83,000...
Andretti Company has a single product called a Dak. The company normally produces and sells 83,000 Daks each year at a selling price of $60 per unit. The company’s unit costs at this level of activity are given below: Direct materials $ 9.50 Direct labor 9.00 Variable manufacturing overhead 2.30 Fixed manufacturing overhead 9.00 ($747,000 total) Variable selling expenses 2.70 Fixed selling expenses 3.50 ($290,500 total) Total cost per unit $ 36.00 A number of questions relating to the production...