Cash Flow Example 3 calculation of cash flow

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Cash Flow Example 3 calculation of cash flow
Income profile of project
This example will show calculation of a cash
flow. Investments start in year 1 and go on over
a six-year period The table shows estimated
incomes over entire project life cycle. As shown
in the table incomes start from sixth year.
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Rough Schedule
We will look at cost sheet of project A rough
schedule which is shown in left side is set for
investment over 5 years.Here we see when the
different activities of project will be
implemented.
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Cost Estimate (kNOK )
We have prepared a cost estimate for the
costs. The needed accumulated investment is
little over 5 mill. NOK and the left table shows
how large the cost of each activity is.
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Investment profile (kNOK)
By dividing the costs on different periods, we
can create an investment profile for project.
For activity, detail planning, total sum is 475
kNOK that is divided on year 1 and 2, that gives
respectively 350 and 125.
In addition to investment costs, there will be
tax, operation and maintenance costs. In this
example, we disregard taxes.
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Operation Maintenance Cost (kNOK)
Left table shows operation and maintenance costs
of project. We see that these costs do not occur
before 6th year the time that construction is
over. Operation and maintenance costs are splited
into fixed and variable parts..
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Cash Flow (kNOK)
We set up a table for entire years of project
life cycle. Where we aggregate operation and
maintenance costs and subtract the obtained sum
from project incomes in order to calculate the
net cash flow for each year.
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Graphical Presentation of Costs
The cash flow enjoys both negative and positive
amounts. Also from graphical presentation we can
see that cash flow ascends from year 0 to year 9,
then it descends until end of project.