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Project 2 The Proposal

By : Team 2 Evan Adamson & Brian Bathke. Project 2 The Proposal. The Scenario. Engineer with 10 years of experience and $100,000 has 2 options. Become a consultant for small time engineering firms. (Finds work 35% of the time for $150 dollars/hr)

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Project 2 The Proposal

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  1. By: Team 2 Evan Adamson & Brian Bathke Project 2 The Proposal

  2. The Scenario • Engineer with 10 years of experience and $100,000 has 2 options. • Become a consultant for small time engineering firms. (Finds work 35% of the time for $150 dollars/hr) • Open up a vehicle repair shop in the local mall for motorcycles, go-karts, dirt bikes, bicycles, etc. (Will be sold in 20 years)

  3. Assumptions for Consultant Job • Length = 20 years • Work = 35% • hours/week = 40 • Weeks/year = 18.2 • $/hr = $150 • yearly income = $109,200 • Inflation Rate = 3% • Income Tax = 30%

  4. Assumptions for Repair Shop • Total rent per year = $48,000 • Tools = $15,000 • Customers a Day = 5 • Open 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 = $45,000

  5. Comparison of Net Income over 20 Year Period • Consultant Job • Income=$2,934,245 • Cost=$2,707,459 • Net Earning=$226,786 • Plus Initial $100,000 • @ 5% rate=$265,000 • @ 9% rate=$560,000 • Total is $787,227 • Repair Shop • Income=$9,637,875 • Cost=$8,932,517 • Salvage is 5 times final years earnings • Salvage= $676,606 • Total w/ Salvage= $1,381,964 • Total w/o Salvage=$705,358

  6. Economic Analysis • Consultant Job • With 9% rate on Initial $100,000 • PV(3%,20yrs,$787227) • Present value of the Consultant Job is equal to $435,868. • With 5% rate on Initial $100,000 • PV(3%,20yrs,$492116) • Present value of the Consultant Job is equal to $272,473 • Repair Shop • With Salvage Value • PV(3%,20yrs,$1381964) • Present value of the Repair Shop is equal to $765,160. • Without Salvage Value • PV(3%,20yrs,$705358) • PV= $390,539

  7. Yearly Income Over Work Life For Consultant Job For Repair Shop

  8. Sensitivity Analysis-Yearly Cost For Consultant Job For Repair Shop

  9. Income Broken Down • Hours over 20 year period = 14,560 • Total Income/Total Hours • $54 per Hr. • Hours over 20 year period = 48,000 • Total Income/Total Hours • $29 per Hr.

  10. Conclusion • In 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 schedule.

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