Cash Flow Example 3 calculation of cash flow

Cash Flow Example 3 calculation of cash flow Income profile of project Year Incom e This example will show calculation of a cash flow. Investments start in year 1 and go on over a sixyear period The table shows estimated incomes over entire project life cycle. As shown in the table incomes start from sixth year. Prosjektstyring

Rough Schedule We will look at cost sheet of project Preplanning 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. Detailed Planning Construction - Section A - Section B - Section C Assembly Prod. start Testing Pilot operation År 7 Year 61 Year 2 Year 3 Year 4 Year 5 Prosjektstyring

Cost Estimate (k. NOK ) Cost category Cost Magnitude preplanning 880 Detailed planning 475 Construction section A 313 Construction section B 784 Construction section C 465 Assembly 738 testing 160 Pilot operation 700 Project management 159 Unpredicted 390 SUM 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. 5 064 Prosjektstyring

Investment profile (k. NOK) Cost category YEAR 1 YEAR 2 YEAR 3 YEAR 4 By dividing the costs on YEAR 5 AMOUNT different periods, we can create an investment profile for project. COST Preplanning 880 Detailed planning 350 125 475 Construction section A 110 203 313 Construction section B 784 Construction section C 230 Assembly 235 490 465 248 738 testing 160 Pilot operation 300 400 700 Project management 35 35 19 159 Unpredicted 80 80 70 390 1455 1457 840 823 489 5 064 SUM For activity, detail planning, total sum is 475 k. NOK 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. Prosjektstyring

Operation & Maintenance Cost (k. NOK) Cost Year Fixed Part Varying Part Total Cost Left table shows operation and maintenance costs of project. We see that these costs do not occur before 6 th year; the time that construction is over. Operation and maintenance costs are splited into fixed and variable parts. . Prosjektstyring

Cash Flow (k. NOK) Cost / Income Year 1 Year 9 Year 2 Year 3 Year 10 Year 11 Year 4 Year 5 Year 12 Year 13 Year 6 Yea 14 Year 7 Year 8 Year 15 Year 16 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. Prosjektstyring

Graphical Presentation of Costs 1000 NOK 20 18 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. 16 14 12 10 8 6 560 2 098 4 091 7 043 10 682 14 546 17 099 19 005 13 623 10 430 4 667 -489 -823 -840 -1 457 2 -1 455 4 Year Prosjektstyring