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As a bank loan officer, you are required to asses a request for a construction overdraft from Oakleigh Construction. Oakleigh Construction has a contract to
As a bank loan officer, you are required to asses a request for a construction overdraft from Oakleigh Construction. Oakleigh Construction has a contract to build new student residences at a regional university to reduce the shortage of affordable student accommodation. The design has been signed off and all necessary approvals are in place. Oakleigh Construction. has been set a deadline of 15 (fifteen) months to complete the project, and she can start nearly immediately. The total contract price is $180,000,000 which includes a profit margin of 16 (sixteen) percent. You can assume costs that will be spread evenly over the life of the project. Labour costs will be 60 (Sixty) per cent of total costs. Interim certificates will be issued on a monthly basis and you client will be paid one month after the first interim certificate is issues. As Oakleigh Construction. is well established in this industry with an 18 (eighteen) year operating history, you can assume that she will have no difficulty in obtaining one-month credit terms for the project. As is usual for projects of this type a retention fund of six (6) percent of the contract value has been set up. Fourteen (14) percent of each payment will be set aside in the retention fund until the retention fund value is six (6) percent of the contract value. Assume your bank requires the builder to provide equity of 45 (forty-five) percent of the cash required. What is the limit of the overdraft that you would be willing to provide to fund this project? Round your answer to whole dollars, with no decimal places
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