1. Prosjektstyring Http://www.prosjektledelse.ntnu.no 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. Year Incom e

2. Prosjektstyring Http://www.prosjektledelse.ntnu.no Rough Schedule Year 5 År 6År 7 Year 4Year 3Year 2 Year 1 Prod. start Preplanning Detailed Planning Construction - Section A - Section B - Section C Assembly Testing Pilot operation 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.

3. Prosjektstyring Http://www.prosjektledelse.ntnu.no Cost Estimate (kNOK ) Cost category SUM Cost Magnitude 5 064 preplanning Detailed planning Construction section A Construction section B Construction section C Assembly testing Pilot operation Project management Unpredicted 880 475 313 784 465 738 160 700 159 390 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.

4. Prosjektstyring Http://www.prosjektledelse.ntnu.no Investment profile (kNOK) Cost category SUM Preplanning Detailed planning Construction section A Construction section B Construction section C Assembly testing Pilot operation Project management Unpredicted YEAR 1 1455 880 350 110 35 80 YEAR 2 1457 125 203 784 230 35 80 YEAR 3 840 235 490 35 80 YEAR 4 823 248 160 300 35 80 YEAR 5 489 400 19 70 COST AMOUNT 5 064 880 475 313 784 465 738 160 700 159 390 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.

5. Prosjektstyring Http://www.prosjektledelse.ntnu.no Operation & Maintenance Cost (kNOK) 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 6th year; the time that construction is over. Operation and maintenance costs are splited into fixed and variable parts..

6. Prosjektstyring Http://www.prosjektledelse.ntnu.no 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. Cost / Income Year 3Year 4Year 5Year 6Year 8Year 1 Year 2 Year 7 Cost / Income Year 11Year 12Year 13 Yea14 Year 16Year 9Year 10 Year 15

7. Prosjektstyring Http://www.prosjektledelse.ntnu.no 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.