The Rogers Construction Company is trying to decide whether to make a bid on a project against 4 competitors. The lowest bid will win the contract and be paid the amount they bid. It believes it will cost the company £10,000 to complete the project (if it wins the contract) and £350 to prepare the bid. Based on historical data, Rogers believes each competitor’s bid has a normal distribution with mean £15,000 and standard deviation £1,500.

a) Set up a simulation model in excel to help the company make the decision of how much to bid.

b) Discuss on the obtained results and make suggestions. For example, what if the competitor’s bid has different distributions?

In 2021, the Westgate Construction company entered into a contract to construct a road for Santa Clara County for $10,000,000. The road was completed in 2023. Information related to the contract is as follows.

3. Complete the information required below to prepare a partial balance sheet for 2021 and 3022 showing any items related to the contract. ( Do not round intermediate calculation)

1a) What is the discounted free cash in year 5 of a project that has an annual free cash of ~100 million and a discount rate of 20%? Number answer is fine with suitable significant figures.

b) If the capital cost of the project is expected to be 1 billion dollars with a construction schedule of 2 years do you expect this project above (100 million non discounted free cash per year) to be economic at a 20% discount rate. 2/3 sentences

c) What does the 20% discount rate suggest about the project risk? 2/3 sentences

Eastman Publishing Company is considering publishing an electronic textbook about spreadsheet applications for business. The fixed cost of manuscript preparation, textbook design, and web-site construction is estimated to be $150,000. Variable processing costs are estimated to be $7 per book. The publisher plans to sell single-user access to the book for $49.

Quantity take-off problem: A capital improvement project requires the installation of a property line fence along the 250 -ft northern boundary line. The decorative aluminum fence is constructed of posts spaced at 10-ft center to center and an ornate picket infill panel between two posts. Given the material costs below, the cost for the construction of the fence is most nearly:

a. $65,771.25

b. $66,461.60

c. $68,402.10

d. $71, 065.58

Material costs:

Aluminum posts: $645.35 each

Ironworker: $78/hr

Picket infill panel: $1,985.50 each

Placed concrete $498.00/cy

1. Ridley Inc. is a small, publicly traded construction company with 50 million shares outstanding trading at $10 a share. Ridley has:

• Unlevered beta of 1.1
• One bank loan with interest payments of $5 million a year for 5 years and a principal payment (FV) of $250 million
• Rating of Baa, for which the default spread is 2%
• Marginal tax rate of 40%

The risk-free rate is 2.5%, and the equity risk premium is 5.5%. What is the current cost of capital for Ridley? (hint: find the MV of debt using the data provided … in order words find the PV of the debt)

(All answers were generated using 1,000 trials and native Excel functionality.)

Statewide Auto Insurance believes that for every trip longer than 10 minutes that a teenager drives, there is a 1 in 1,000 chance that the drive will results in an auto accident. Assume that the cost of an accident can be modeled with a beta distribution with an alpha parameter of 1.5, a beta parameter of 3, a minimum value of $500, and a maximum value of $20,000. Construct a simulation model to answer the following questions. (Hint: Review Appendix 11.1 for descriptions of various types of probability distributions to identify the appropriate way to model the number of accidents in 500 trips.)

a) On January 1, Blair began construction of a new plant. On this date, the company purchased a parcel of land for $200,000 in cash. In addition, it paid $3,000 in surveying costs and $1,000 for the title insurance policy. An old dwelling on the premises was demolished at a cost of $5,000, with $2,000 being received from the sale of materials. Architectural plans were also formalized on January 1, when the architect was paid $40,000. The necessary building permits costing $4,000 were obtained from the city and paid for on January 1 as well. The excavation work began during the first week in December with payments made to the contractor as follows: Date of payment Amount of payment February 28 $300,000 June 1 400,000 August 31 200,000 The building was completed on September 30, 2015. To finance construction of this plant, Blair borrowed $1,000,000 from Small World Bank on January 1, 2015. Blair had no other borrowings. The $1,000,000 was a 15-year loan bearing interest at 6%. b) Upon completion of the new plant, Blair put the land and building held on January 1 up for resale. c) During October, major updates were made to the equipment at a cost of $12,000. The useful life of the equipment is not extended by these updates, but productive capacity was improved. Based on the above, determine the amounts that Blair Company should report at December 31, 2015 related to the following accounts: A. Land B. Buildings C. Equipment D. Investments E. Interest Expense F. Repairs and Maintenance Expense

A city is deciding whether it makes sense to invest in a light rail line. Engineers have projected that if the rail line were to be built, once completed it would reduce travel time for 2,000 commuters by 60 minutes per day (for each workday). The line will take four years to build. The costs of construction are projected to equal $25,000,000 per year, and the costs of operating the line are assumed to equal $2,000,000 per year. Assume that the project is to be evaluated over a 20 year time horizon, and Evermore uses its borrowing rate of 3% as the discount rate.

1. Assume that time is valued at $20 per hour per commuter. There are 5 workdays per week in a 52 week year. Calculate the monetary value of the reduced commute time projected to result from construction of the light rail line.
2. Using the spreadsheet template that is provided, calculate:
   1. the net present value of the project;
   2. The benefit-cost ratio.

1. Now suppose that Evermore seeks federal funding for the project, and is told that in evaluating the project it needs to use the discount rate recommended by OMB for infrastructure projects. How would this change your results?