Cash Flow

You have received notification that you were the low bidder on a project at $6,125,500. Your CFO has asked you to review your estimate and schedule so she can prepare for the companys financing needs in delivering the upcoming project.

The total bid was for $6,125,500, and the contract provides 180 calendar days to complete the project. You anticipate starting on May 1^st. Based on your estimate and schedule, you have determined the percentage of the total contract value to be performed each month is as follows:

1. May 12%
2. June 18%
3. July 22%
4. August 25%
5. September 13%
6. October 10%

The project was bid with 12% POH (e.g. direct costs + general conditions = $5,468,750). Retainage is 10% of each months progress payment. The contract stipulates you will submit the application for payment at the end of month and will receive payment within 30 days. Retainage will be released within 60 days of contract completion (assuming all punchlist items are satisfied). The bid is balanced with respect to direct, indirect, and subcontracted work (e.g. the percentages by month are the same for all three types of cost). You are self-performing 40% of the work which will require payment for M/L/E in the month the costs were incurred. The remaining work is subcontracted, and you have pay-when-paid clauses in all of your subcontracts. You have an open credit line for interest only payments at 6% APR charged monthly. Complete the following table (ignore retainage on subcontracts)

Month	Pay Request	Retainage	Payment Received	Self-Perform Payments Disbursed	Subcontract Payments Disbursed	Cumulative Balance	Finance Cost @6%
May
June
July
August
September
October
November
December

What is the maximum line of credit the CFO needs to plan for?

What is the total interest cost incurred by the company?