FINANCIAL MANAGEMENT #7

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BCN 3753 FINANCIAL MANAGEMENT OF CONSTRUCTION ORGANIZATIONS

Spring 2015 - Homework Assignment #7 (50 Points)

Due Date: April 21, 2015 – 5:00 PM

(**Note: The information provided in each problem is sufficient to solve the problem

independent of your answers to the other problems)

Important Submission Instructions:

1. In class students should submit homework assignments in class (hard copy). The answers to all the questions should be turned in together (stapled) – Only students

who are absent are allowed to submit their homework on Blackboard

2. For submissions on Blackboard (FEEDS students), the answers to all the questions should be saved and submitted in a SINGLE PDF file. Otherwise, the HW will not be

graded.

1. (25 points) The balance sheet and income statement for West Mountain Construction Firm is

shown in the apprendix. Using the information presented in the financial statements,

determine:

a. The solvency of the firm using liquidity indicators

b. The profitability of the firm using profitability indicators

c. The efficiency of financial processes using efficiency indicators

d. The capital structure of the firm using capital structure indicators

2. (25 points) You have been awarded a road project from a local transportation agency. The client makes

payments to the contractor periodically for construction expenditures. Suppose that all receipts and

expenditures (in million dollars) are made at year ends as shown below. Determine the overdraft at the

end of each if the project is financed with an overdraft at an annual interest rate of 10%.

Year 0 1 2 3 4 5

Receipts

Expenditures

0

$1.250

$4.764

$6.821

$7.456

9.362

$8.287

7.744

$6.525

4.323

$2.468

0

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APPENDIX

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