Fundamentals of Engineering Economics 3rd Edition by Chan Park

Exercise 1

K J Enterprise Inc. has purchased a small motor engine line to go in golf carts. The total purchase cost was $1.5 million, which can generate revenues of $650,000 per year. Direct manufacturing costs are expected to run $220,000 a year and other fixed cost expenditures would be somewhere near $80,000 a year. The O M cost would be around $45,000 a year, and K J expects to pay various taxes including income taxes of $58,000. The project would last about 10 years and at that time, the business could be sold for $1 million. Determine the project cash flows over a 10-year period.