A construction company entered into a fixed-price contract to build an office building for $38 million. Construction costs incurred during the first year were $12 million and estimated costs to complete at the end of the year were $18 million. During the first year the company billed its customer $14 million, of which $7 million was collected before year-end.

What would appear in the year-end balance sheet related to this contract using the percentage-of-completion method? (Enter your answers in whole dollars.)

In January 2010, Construction Corp. contracted to construct a building for $ 6,000,000. Construction started in early 2010 and was completed in 2011. The following additional information is available:

                                                                                                   2010                       2011

       Costs incurred............................................................. $ 2,430,000            $ 2,700,000

       Estimated costs to complete............................................. 2,600,000                         —

       Collections during the year.............................................. 2,400,000               3,600,000

         Billings for the year …………………………………………..     2,800,000                3,200,000

Used the percentage-of-completion method.

Instructions

Under the contract-based approach,

a)     How much revenue should be reported for 2010 and 2011?

b)    Prepare all journal entries for 2010 and 2011 for this contract.

The builder of a new movie theater is trying to decide how many screens she wants. Below are her estimate of the number of patrons the complex will attract each year depending on the number of screens available. Number of screens: Total number of patrons 1 50,000 2 95,000 3 135,000 4 170,000 5 195,000 The owner expects to net $2 per ticket sold. Construction costs are $1,000,000 per screen. The screen can always be resold for $1,000,000 at the end of the year. However, the builder has to borrow $1,000,000 per screen and pay the lender the prevailing interest rate.

a) What is the marginal product per screen? In other words how much revenue does each screen generate

b) How many screens will be built if the interest rate is 6%

c) How many screens will be built if the interest rate is 8.5%?

d) How many screens will be built if the interest rate is 12%

A light-rail transportation project is proposed to connect the centre of a city to a growing suburban neighbourhood. The project is expected to cost $480 million for construction, right-of-way purchase, and traffic control systems. Half the cost must be allocated at the beginning of the project and the other half is paid upon construction completion. Construction is expected to take two years. The useful life of this project is 20 years after construction is completed. Operation and maintenance cost is expected to be $13 million per year after construction is completed. The project is expected to generate ridership revenues of $38 million per year (after construction).

This new transportation alternative is expected to generate a total of $26 million per year in benefits in terms of travel time savings and safety improvements. Because this is a public project, the ridership revenues in terms of tickets are to be treated as negative costs not benefits, i.e., there is no direct benefit to the society by charging consumers. The social discount rate for this project is chosen to be 3%.

Calculate the benefit/cost ratio of this project and comment on its feasibility.

How does bundling payments, like insurance companies paying a per diem rate for all hospital hotel-type services, encourage cost savings on the part of the hospital?

Evans Park

Evans Park is a small amusement park that provides a variety of rides for children and teens.   In a typical summer season, the park sells twice as many child tickets as adult tickets.   Adult ticket prices are $18 and the children’s price is $10.   Revenue from food and beverage concessions is estimated to be $60,000, and souvenir revenue is expected to be $25,000.   Variable costs per person (child or adult) are $3.25.   Fixed costs amount to $150,000.   Build a model to show the profitability of this park based on these facts.  

REQUIRED: Show the model with adult sales at the break-even point.

HINT: The EvansPark sheet gives a starting point.   After entering labels and formulas for your model, use Goal Seeking to find where to adjust adult ticket sales so that profit equals zero.   “Goal Seek” is found under the “What-If Analysis” button of the “Data” ribbon.

Over the past six months, Six Flags conducted a marketing study on improving their park experience. The study cost $3.00 million and the results suggested that Six Flags add a kid's only roller coaster.

Suppose that Six Flags decides to build a new roller coaster for the upcoming operating season. The depreciable equipment for the roller coaster will cost $50.00 million and an additional $5.00 million to install. The equipment will be depreciated straight-line over 20 years.

The marketing team at Six Flags expects the coaster to increase attendance at the park by 5%. This translates to 110,714.00 more visitors at an average ticket price of $39.00. Expenses for these visitors are about 12.00% of sales.

There is no impact on working capital. The average visitor spends $23.00 on park merchandise and concessions. The after-tax operating margin on these side effects is 31.00%. The tax rate facing the firm is 36.00%, while the cost of capital is 8.00%.

What is the NPV of this coaster project if Six Flags will evaluate it over a 20-year period? (Six Flags expects the first year project cash flow to grow at 5% per year, going forward)
(Express answer in millions)

Over the past six months, Six Flags conducted a marketing study on improving their park experience. The study cost $3.00 million and the results suggested that Six Flags add a kid's only roller coaster.

Suppose that Six Flags decides to build a new roller coaster for the upcoming operating season. The depreciable equipment for the roller coaster will cost $50.00 million and an additional $5.00 million to install. The equipment will be depreciated straight-line over 20 years.

The marketing team at Six Flags expects the coaster to increase attendance at the park by 5%. This translates to 107,097.00 more visitors at an average ticket price of $38.00. Expenses for these visitors are about 17.00% of sales.

There is no impact on working capital. The average visitor spends $22.00 on park merchandise and concessions. The after-tax operating margin on these side effects is 29.00%. The tax rate facing the firm is 34.00%, while the cost of capital is 10.00%.

What is the NPV of this coaster project if Six Flags will evaluate it over a 20-year period? (Six Flags expects the first year project cash flow to grow at 5% per year, going forward)
(Express answer in millions)

Write a hotel blog about a hotel that you visited recently. Remember that you need to write the text in perfect tense. Please write minimum 30, maximum 40 sentences. Also specify which hotel category suits your hotel.

Many University campuses sell parking permits to their students allowing them to park on campus in designated areas. Although most students complain about the relatively high cost of these permits, what annoys many of these students even more is that after having paid for their permits, vacant parking spaces in the designated lots are very difficult to find during much of the day. Many end up having to park off campus anyway, where permits are not required. Assuming the University is unable to build new parking facilities on campus due to insufficient funds, what recommendation might you propose that would remedy the problem of students with permits being unable to find places to park on campus? (Hint: Think in terms of demand and supply analysis and how a market functions.)