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Your company, Civil Pty Ltd, is in the Quarrying business and is considering investing in expanding an existing quarry in the North of Melbourne
Your company, Civil Pty Ltd, is in the Quarrying business and is considering investing in expanding an existing quarry in the North of Melbourne for supply of road aggregates, using some new energy efficient plant developed in Australia. The quarry will have an extended life of 20 years. The operation of the plant will cost $0.24m per year. A preventative maintenance program will cost $0.12m per year. Every 4 years the facility will require a major refurbishment costing $1.3m that will proceed without impacting income. The operation will also incur a cost of Green House Gas carbon emission cost per year equal to 8% of operation costs and 3% of project costs. All Project & Operations costs and income can be modelled as expended mid-year except refurbishment which occurs at calendar year end. It is estimated that the project for design, procurement, construction and commissioning will cost $128.0 million. The land for the facility is included in the project cost. Remediation and land sale at plant end of life will be a net income of $4m. Cashflow for the Project initial installation cost is 20% in year 0, 60% year 1 & 20% in year 2. After project commissioning and handover, the facility will start operating from fourth year and will operate for 20 years. The income is estimated to be $35m pa modelled at mid year on average. The company's current standards for LCC analysis are as follows: Escalation of construction, end of life remediation and refurbishment costs for this facility, 4.5 % pa from a base date of year 0 Escalation of Operating and maintenance costs 3% pa Escalation of Revenue from this facility 2% pa Nominal weighted average cost of company financing and shareholder returns 17.8% pa. As part of this project, your job is to Prepare for your managers approval, a professionally structured, logically presented Life Cycle Costing model in excel. The company standards require the excel model be professionally laid out, and be print ready. including appropriate headers and footers and with a brief summary of results and discussion. (3+3= 6 marks) Provide a cash flow diagram; - if a hand drawn cashflow, photograph and insert it into the excel model. (6 marks)
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