New Jersey Institute of Technology Engineering Managment Project Discussion

Identify which costs are investment costs (initial costs) or operating costs to offset the

cost outlined on the Estimate Activity Cost Table by providing the following:

a. Analysis of investment cost. Refer to Table 12-1 on page 131 of Engineering

Economics book for more details. Identify the lenders (investors) initial

investment to startup the project.

b. Analysis of the operating costs. Refer to Table 12-2 on page 132 of Engineering

Economics book for more details. Identify the lenders (investors) annual (or

monthly) investment to the maintain the project (after the initial investment).

Create a Cash Flow Diagram to represent the transactions of cash which will take place

over the course of your project. Transactions can include initial investments,

maintenance costs, projected earnings or savings resulting from the project, as well as

salvage and resale value of equipment at the end of the project. The cash flow

statement tracks how much cash your project has on hand at any given time. Once your

project is up and running, you’ll want to keep close tabs on your cash flow statement.

For now, however, you’re creating a cash flow projection. Think of the cash flow

projection as a forecast for your project checking account. It details when you need to

spend money on things such as inventory, rent and payroll, and when you expect to

receive payments from customers and clients. For example, you may make a sale, have

to buy inventory to fulfill the sale, and not collect payment from the customer for 30, 60

or 90 days. The cash flow projection takes these factors into account, helping you

budget for upcoming expenses, so your project doesn’t run out of money.

Refer to page 5 of Engineering Economics book for more details on Cash Flow Diagram.