Team 8Team Members & RolesSlide 3ScenariosScenario 1 Starts a Construction CompanySlide 6Scenario 2 Remains EmployedSlide 8Slide 9Sensitivity AnalysisSlide 11Useful ResourceRESOURCESTeam 8Team 8Being Self-EmployedBeing Self-EmployedVs.Vs.Being EmployedBeing EmployedTeam Members & RolesTeam Members & RolesTerence Krall: Terence Krall: LeaderLeaderWellman Yu: Wellman Yu: OrganizerOrganizerOlaide Olambiwonnu: Olaide Olambiwonnu: SummarizerSummarizerChristopher Narvaez: Christopher Narvaez: TechieTechieTeam Members & RolesTeam Members & RolesTerence Krall: Terence Krall: LeaderLeaderWellman Yu: Wellman Yu: OrganizerOrganizerOlaide Olambiwonnu: Olaide Olambiwonnu: SummarizerSummarizerChristopher Narvaez: Christopher Narvaez: TechieTechieScenariosScenariosA 35 year old construction worker with about A 35 year old construction worker with about 10 years of experience has just inherited a 10 years of experience has just inherited a $100,000. With this money, he can either $100,000. With this money, he can either start his own construction company or start his own construction company or remain employed at his construction job remain employed at his construction job while investing the money at a rate of 6% for while investing the money at a rate of 6% for 10 years.10 years.Which is the better option? Which is the better option?Scenario 1Scenario 1Starts a Construction CompanyStarts a Construction CompanyAdvantages:Advantages:No BossNo BossSchedule VariesSchedule VariesTax Write-OffsTax Write-OffsDisadvantages:Disadvantages:Income variesIncome variesNo BenefitsNo Benefits10% of the cash flow is saved each 10% of the cash flow is saved each yearyearMARR: 12%MARR: 12%Time Period: 10 yearsTime Period: 10 yearsFuture Worth: $359, 956.73Future Worth: $359, 956.73Scenario 2Scenario 2Remains EmployedRemains EmployedAdvantages:Advantages:Steady Income Steady Income Steady ScheduleSteady ScheduleBenefitsBenefitsDisadvantages:Disadvantages:BossBossNo tax write-offsNo tax write-offsMARR: 6%MARR: 6%Time Period: 10 yearsTime Period: 10 yearsFuture Worth: $335, 783.94Future Worth: $335, 783.94Scenario 1 results in a greater future Scenario 1 results in a greater future worthworthTherefore, starting his own Therefore, starting his own construction company is the better construction company is the better option.option.Sensitivity AnalysisSensitivity AnalysisScenario 1: If Scenario 1: If MARR is reduced to 10% or 11%, MARR is reduced to 10% or 11%, scenario 2 is preferredscenario 2 is preferredtime period is reduced 8 or 9 years, time period is reduced 8 or 9 years, scenario 2 is preferredscenario 2 is preferredScenario 2: IfScenario 2: IfMARR is increased 8%, scenario 1 is MARR is increased 8%, scenario 1 is preferredpreferredtime period is increased 12 years, time period is increased 12 years, scenario 1 is preferred.scenario 1 is preferred.Useful ResourceUseful Resourcehttp://www.ajdesigner.com/phppresenthttp://www.ajdesigner.com/phppresentworth/present_worth_value_equation_ fworth/present_worth_value_equation_ future.phputure.phpThis website is useful for all aspects of This website is useful for all aspects of Engineering Economic AnalysisEngineering Economic AnalysisIt can calculate present worth, future worth, It can calculate present worth, future worth, interest rates, time period, depreciation etc.interest rates, time period, depreciation etc.It is also good for solving math, physics, It is also good for solving math, physics, chemistry, engineering, and all science chemistry, engineering, and all science problems.problems.RESOURCESRESOURCESEngineering Economic Analysis- 2Engineering Economic Analysis- 2ndnd Edition by Donald G. Newnan et al.Edition by Donald G. Newnan et al.Personal Interview with a self-Personal Interview with a self-employed construction workeremployed construction
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