PS4-08 - HO#20 CE 166 Construction Engineering Problem Set...

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HO #20; 10/13/08 CE 166 Construction Engineering Fall 2008 Problem Set 4 Total: 100 points Due: October 22, 2008 1. The contractor purchases a truck crane for $215,000. The cash flows of the contractor’s expenses and the realized income related to the truck crane are shown in the table below. The contractor establishes an overdraft account with a bank at 6% p.a. interest rate to purchase the crane, charge yearly expenses to, as well as deposit income as a result of owning and operating the crane. (The account may earn interest on positive balances at 6% p.a.) Assuming that there is no inflation (and thus a change in interest rates during the life of the overdraft account), determine the cumulative cash flow for this account (show yearly balances and show your work in a tabular format). Interest is charged using the end-of-period balance method. What is the contractor’s gross profit/loss just before he closes this account at the end of year 5? (30 points)
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