Being Self-Employed

1
Team 8

• Being Self-Employed
• Vs.
• Being Employed

2
Team Members Roles

• Terence Krall Leader
• Wellman Yu Organizer
• Olaide Olambiwonnu Summarizer
• Christopher Narvaez Techie

3
Team Members Roles

• Terence Krall Leader
• Wellman Yu Organizer
• Olaide Olambiwonnu Summarizer
• Christopher Narvaez Techie

4
Scenarios

• A 35 year old construction worker with about 10
  years of experience has just inherited a
  100,000. With this money, he can either start
  his own construction company or remain employed
  at his construction job while investing the money
  at a rate of 6 for 10 years.
• Which is the better option?

5
Scenario 1Starts a Construction Company

• Advantages
• No Boss
• Schedule Varies
• Tax Write-Offs

• Disadvantages
• Income varies
• No Benefits

6

• 10 of the cash flow is saved each year
• MARR 12
• Time Period 10 years
• Future Worth 359, 956.73

7
Scenario 2Remains Employed

• Advantages
• Steady Income
• Steady Schedule
• Benefits

• Disadvantages
• Boss
• No tax write-offs

8

• MARR 6
• Time Period 10 years
• Future Worth 335, 783.94

9

• Scenario 1 results in a greater future worth
• Therefore, starting his own construction company
  is the better option.

10
Sensitivity Analysis

• Scenario 1 If
• MARR is reduced to 10 or 11, scenario 2 is
  preferred
• time period is reduced 8 or 9 years, scenario 2
  is preferred

11

• Scenario 2 If
• MARR is increased 8, scenario 1 is preferred
• time period is increased 12 years, scenario 1 is
  preferred.

12
Useful Resource

• http//www.ajdesigner.com/phppresentworth/present_
  worth_value_equation_future.php
• This website is useful for all aspects of
  Engineering Economic Analysis
• It can calculate present worth, future worth,
  interest rates, time period, depreciation etc.
• It is also good for solving math, physics,
  chemistry, engineering, and all science problems.

13
RESOURCES

• Engineering Economic Analysis- 2nd Edition by
  Donald G. Newnan et al.
• Personal Interview with a self-employed
  construction worker