Question

Two quick questions: please show basic caculations.

1.) Determine the payback period if the initial cost is $50,000, billable revenue of $50 per hour and cost to operate $15 per hour plus the operator cost at $20 per hour. The billable hours per year are 1,020. MUST show calculations to receive full credit

2.) Calculate the total profit and percentage of construction revenue that became profit: Revenue: $700,000 Total construction costs: $200,000 General overhead: $100,000. MUST show calculations to receive full credit.

Answer 1

1) payback period is the period in which the initial cost is recovered through the net profit/ savings.

in this case billable revenue and cost incurred is same in all years.

initial investment= $ 50000

Billable revenue per hour = $ 50

total cost = $ 15 + $ 20 = $ 35

Net profit per hour = $ 50- $ 35 = $ 15

Billable hours per year =1020

Net cash inflow per year = Billable hours per year X net profit per hour

=1020 hours X $ 15 =$ 15300

Pay back period = Initial investment / net cash inflow

= $ 50000/ $ 15300

= 3.26 years or 3 years and 3 months and 4 days (round of to next day)

2) Construction cost = $ 200000

Revenue= $ 700000

General Overhead = $ 100000

Total profit: Revenue - Construction cost - general overhead

Total profit= $700000- $ 200000- $100000

Total profit = $ 400000

% of construction revenue that become profit= Total profit X 100 / Total revenue

=) $ 400000 X 100 / $700000

=) 57.14%