Slide 1The ScenarioAssumptions for Consultant JobAssumptions for Repair ShopComparison of Net Income over 20 Year PeriodEconomic AnalysisYearly Income Over Work LifeSensitivity Analysis-Yearly CostIncome Broken DownConclusionPROJECT 2 THE PROPOSALBy: Team 2 Evan Adamson&Brian BathkeThe ScenarioEngineer with 10 years of experience and $100,000 has 2 options.a) Become a consultant for small time engineering firms. (Finds work 35% of the time for $150 dollars/hr)b) Open up a vehicle repair shop in the local mall for motorcycles, go-karts, dirt bikes, bicycles, etc. (Will be sold in 20 years)Assumptions for Consultant JobLength = 20 years Work = 35% hours/week = 40 Weeks/year = 18.2 $/hr = $150 yearly income = $109,200 Inflation Rate = 3%Income Tax = 30%Assumptions for Repair ShopTotal rent per year = $48,000Tools = $15,000 Customers a Day = 5Open Days a week = 6 Open weeks a year = 50 Total customers = 1500 Avg. price per customer = $65 Income = $97,500 Inflation = 3% Tax = 35% Total Company Cost = $45,000Comparison of Net Income over 20 Year PeriodConsultant JobIncome=$2,934,245Cost=$2,707,459Net Earning=$226,786 Plus Initial $100,000@ 5% rate=$265,000@ 9% rate=$560,000Total is $787,227Repair ShopIncome=$9,637,875Cost=$8,932,517Salvage is 5 times final years earningsSalvage= $676,606 Total w/ Salvage= $1,381,964 Total w/o Salvage=$705,358Economic AnalysisConsultant JobWith 9% rate on Initial $100,000PV(3%,20yrs,$787227)Present value of the Consultant Job is equal to $435,868.With 5% rate on Initial $100,000PV(3%,20yrs,$492116)Present value of the Consultant Job is equal to $272,473Repair ShopWith Salvage ValuePV(3%,20yrs,$1381964)Present value of the Repair Shop is equal to $765,160.Without Salvage ValuePV(3%,20yrs,$705358)PV= $390,539Yearly Income Over Work LifeFor Consultant Job For Repair Shop0 5 10 15 20 25-150000-100000-50000050000100000150000Net Earning Over 20 Years0 5 10 15 2080009000100001100012000130001400015000Net Earning Over 20 YearsSensitivity Analysis-Yearly CostFor Consultant Job For Repair Shop38000 48000 58000 68000 78000 88000-600000-400000-200000020000040000060000080000010000001200000Cost of living per year vs. Net earnings0200000400000600000800000100000012000001400000160000018000002000000Cost of living per year vs. Net earningsIncome Broken DownHours over 20 year period = 14,560Total Income/Total Hours$54 per Hr.Hours over 20 year period = 48,000Total Income/Total Hours$29 per Hr.ConclusionIn conclusion the Repair shop produces more wealth but at a much higher risk.Consultant Job along with well invested initial $100,000 produces a comfortable life.Our choice is Consultant Job because of less hectic work
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