A city\'s recreation and parks department needs to expand an existing public spo

Question

A city's recreation and parks department needs to expand an existing public sports complex. The city engineer determines the following life cycle cost estimates: Initial costruction costs will be $225,000, annual operating and maintenance expenses will be $85,000, in year 6 the complex will need a $75,000 refurbishment, the estimated salvage value in year 10 is $100,000. Additionally, the city financial officer estimates that the expanded complex will generate $190,000 annually (... from use-fees, rental, space leased to food and bevarge vendors, etc.). Draw a cash flow Diagram.

Explanation / Answer

Please find the following cah flow diagram:-

Particulars 0 1 2 3 4 5 6 7 8 9 10 Initial Construction Cost (225000) Annual Op and Maintenance Cost (85000) (85000) (85000) (85000) (85000) (85000) (85000) (85000) (85000) (85000) Refurbishment (75000) Salvage Value of Complex 100000 Cash Inflow 190000 190000 190000 190000 190000 190000 190000 190000 190000 190000 Net Cash Flow (225000) 105000 105000 105000 105000 105000 30000 105000 105000 105000 205000

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