Cash flow and life cycle cost analysis

Cost as the part of [project life cycle

Cost in every stage of project present in cash flow

Method that we use to evaluate the cost is engineering economic

We do feasibility study at the initial part of the project before it starts. It requires some
estimation to conduct. The importance part in this case that we consider are cost and revenue.
The time also be essential since when the revenue and cost will are achieved its own turning
point
Cash flow estimate inflow (revenue) and outflow (cost). In cash flow, horizontal line
represent time (cash flow not only show money but also the time when it will inflow and
outflow).
Time unit is dependent on the case you study. It might be monthly and year. Mostly using is
year bcs most project in long term period. The time axis starts from zero which show the
current time.
The vertical line/arrow that present amount of money that cash in and cash out (Upward
arrow = cash inflow, downward = cash outflow).
Since it based on estimation, what should we do if the cash flow is the different with
the condition in field?
It means you fail to do estimation through the cash flow. Something that will happen
in future called as risk. Some risk you can predict based on experienced, but some major
change such pandemic cannot be predict at all. How long the revenue will achieve, it based
on typical of business such 5 years to 10 years. Imagine you open small shop that require
feasibility study, amount of money is totally different, so we cannot use same indicator to
evaluate that environment. If in several years it’s not back as your estimation, try to see the
factor involved. Don’t make your prediction too detail such mention 1.430 milions rupiah, it
means you don’t what you do.
Determination of cash flow is based on point of view of the subject.
The structure of cost and revenues. Every single activity that we conduct in business relate
with big amount of money, so we need to identify and estimate cost and revenue. To prepare
use the concept of life cycle. First know Acquisition and operation (both you need money).

Your business will be related with working capital.

If your business is new for you, you need more external source since the internal source is not
available. For example, you build second hotel, you may take historical track of your first
hotel. Otherwise, if it the first hotel you need external data more.
Cost and revue based on life cycle cost because you should consider all cost that involved in
such operational cost, initial cost, transportation cost. Etc. Those all are using to find optimal
alternative decision of your project. LCCA used when it meets desire condition. Every step
you take have financial consequence.
Life-cycle cost analysis (LCCA) Background  investor sometime face the problem of rising
budget with the number of limited budgets. Procurement cost (capital cost) only about 30% to
40% from total cost. LCCA help to make best decision.
Evaluation, can use criteria on observation when asset it’s not economical or cannot be
operational at all.
Replacement cost used for component that are not used at all. And many values that involved
in. Implementation increase the potential of question to be chosen by investor. LCCA can
applied in every project to analyse cost to analyse cost. LCCA able to apply in complex
project maybe because components it much more.