The contractor’s construction expenses and the owner’s payments for a construction project in the contract agreement are shown below. The contractor has established a line of credit from the bank at a monthly interest rate of 2%, and the contractor is allowed to borrow the shortfalls between expense and receipt at the end of each month but must deposit any excess of net operating cash flow to reduce the loan amount. The owner doesn’t retain any of the validated progress payment claims in this project (i.e. retainage/retention = 0).

Determine the cumulative (monthly) net cash flow, including interest due to overdraft.

 

End of Month 1 2 3 4 5 Total Contractor's Expenses $50,000 $145,000 $225,000 $130,000 $0 $550,000 Owner's Payments $0 $87,500 $188,700 $139,200 $189,600 $605,000 Contractor's Cumulative Net Cash Flow