Question

• Land cost 1 million paid at the beginning of a project,
• Design and construction for total of 3 million paid in an increasing gradient yearly payment of $300,000 = starting in zero ($0) in year one until it reaches the total value.
• Operation starts once the design and construction phase is paid in total : then, operation and maintenance costs start being $900,000 = per year
• With operation , revenues come with a value of $1,000,000 = per year
• After operation starts, every 3 years , special maintenance is required at a cost of $180,000 =
• The plant is expected to operate for at least 21 years i.e. since it starts operations
• The salvage value of the plant has been estimated at $800,000, 000
Using these facts, prepare a cash flow diagram

Answer 1

Answer on Question #80346, Economics / Economics of Enterprise

Since the completion of the design and construction phase, cash flows for 21 years will yield a positive result - $ 840,000.

Taking into account investing in the land of 1,000,000 $and in the construction of 3,000,000$, the result is negative 840000-1000000-3000000 = -3160000 $.

But the liquidation value of the plant covers such costs at any stage. 800000000 covers all available investments and costs.