1. Using the project cost structure calculations discussed in class, calculate the customer price for a project requiring the following:
Senior Engineer: $2000/week for 6 weeks
Junior Engineer: $1500/week for 12 weeks
Configuration Mgmt: $900/week for 5 weeks
Test and Integration: $700/week for 3 weeks
Overhead: 75%
Other Direct Costs: $20,000
G&A: 25%
Profit: 7%
Show your work for full credit! (Suggestion: Copy/paste cells as an Excel object into Word.)
2. Your team just completed the cost estimates for your project. If accepted, you would need an initial investment of $200,000 in Research and Development. There will be construction costs in the first year of $350,000. Annual sales of $300,000 will begin in year 2 and continue through year 5. Your annual operating costs will be $50,000 for each year you sell the product. If the discount rate is 12%, what is the NPV for this project? Should you invest in this project based on the NPV?
Show your work for full credit! (Suggestion: Copy/paste cells as an Excel object into Word.)
3. What is the IRR for the project in problem #6? If the Minimum Attractive Rate of Return (MARR) is 20%, would you recommend investing in this project? Discuss any reasons that you might not invest in a project even if it exceeds the MARR.
Show your work for full credit! (Suggestion: Copy/paste cells as an Excel object into Word.)