Advanced Engineering Economics
As a result of Michigan’s high unemployment rate (the largest in the nation) many small companies are going out of business or struggling to survive. One industry that has been hit particularly hard is the construction industry, and many small construction companies in Michigan have been looking into ways to expand their business and remain profitable. One possible solution to this problem is to pursue construction jobs outside of the state of Michigan, but the profitability of this business model is questionable. The goal of our study is to analyze the profitability of pursuing out-of-state construction projects for a small Michigan based construction company. After identifying the top 5 growing metropolitan areas within 800 miles of Detroit Michigan, we used information from the company regarding project costs that vary by location, and analyzed the profitability for projects in each location, using the company’s MARR of 16%. Based on our NPV model and sensitivity analysis, we have demonstrated that out-of-state projects can be profitable for this company, and were able to recommend one metropolitan area with the highest PW for the company to pursue. In addition, based on the results of our sensitivity analysis, we were able to make recommendations for further cost savings for out-of-state projects and suggestions for future work in this area.
Wakefield, Erin; Intarode, Nuttavut; Torgeson, Tiffani; and Al Marzouqi, Manal, "Analysis of Profitability of Out-of-State Projects for a Small Construction Company in Michigan" (2009). Engineering and Technology Management Student Projects. 804.