An engineering project expenditure and income cash flows are listed below: Expenditure: Initial infrastructure cost = RM 100,000 Annual operating cost = RM 15,000 One-time major overhaul cost = RM 30,000 (end of year 5) Annual operating cost increased linearly = RM 2000 (starting end of year 6 until end of project life) Income: Annual income = RM 100,000 (starting end of year 6 until end of project life) Additional single income X at the end of project life Project life = 10 years i. Construct a cash flow diagram to show the income and expenditure for the above project. ii. Determine how much more additional income (X) to be generated in a single payment receipt at year 10 in order to recover all the total expenditure? Assume the growth rate is 12.5% per year.
An engineering project expenditure and income cash flows are listed below:
Expenditure:
Initial infrastructure cost = RM 100,000
Annual operating cost = RM 15,000
One-time major overhaul cost = RM 30,000 (end of year 5)
Annual operating cost increased linearly = RM 2000 (starting end of year 6 until end of project
life)
Income:
Annual income = RM 100,000 (starting end of year 6 until end of project life)
Additional single income X at the end of project life
Project life = 10 years
i. Construct a cash flow diagram to show the income and expenditure for the above
project.
ii. Determine how much more additional income (X) to be generated in a single
payment receipt at year 10 in order to recover all the total expenditure? Assume the
growth rate is 12.5% per year.
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