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A project has the following cashflows. The project's cumulative cashflow turns positive between year 4 and 5, to be precise it is 4.22. Your further analysis indicates that you are too conservative about the cash flows for Year 1 and 2. You expect both cash flows to be at least $1000 higher, if not more :) How will this affect your calculation of the precise time when the cumulative cashflow turns positive? t 0 1 2 3 4 5 6 $ Cash flow (250,000) 41,000 48,000 63,000 79,000 88,000 64,000

A project has the following cashflows. The project's cumulative cashflow turns positive between year 4 and 5, to be precise it is 4.22. Your further analysis indicates that you are too conservative about the cash flows for Year 1 and 2. You expect both cash flows to be at least $1000 higher, if not more :) How will this affect your calculation of the precise time when the cumulative cashflow turns positive? t 0 1 2 3 4 5 6 $ Cash flow (250,000) 41,000 48,000 63,000 79,000 88,000 64,000

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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### Project Cash Flow Analysis A project has the following cash flows outlined in the table. The project's cumulative cash flow turns positive between year 4 and 5; specifically, it occurs at 4.22 years. Upon further analysis, it's suggested that the cash flows for Years 1 and 2 are too conservative, estimating they could be at least $1,000 higher. How might this affect the calculation of the precise time when the cumulative cash flow turns positive? #### Cash Flow Table - **Year (t)** | **Cash Flow ($)** - 0 | (250,000) - 1 | 41,000 - 2 | 48,000 - 3 | 63,000 - 4 | 79,000 - 5 | 88,000 - 6 | 64,000 - 7 | 41,000 #### Options for Consideration: - The project's cumulative cash flow turns positive slightly earlier. - The project's cumulative cash flow now turns positive much later. - The project's cumulative cash flow now turns positive slightly later. - No change. The cumulative cash flow remains positive between year 4 and 5, precisely at 4.22. --- The expectation of higher cash flows for Years 1 and 2 would likely mean the cumulative cash flow would turn positive slightly earlier than currently calculated.
Transcribed Image Text:### Project Cash Flow Analysis A project has the following cash flows outlined in the table. The project's cumulative cash flow turns positive between year 4 and 5; specifically, it occurs at 4.22 years. Upon further analysis, it's suggested that the cash flows for Years 1 and 2 are too conservative, estimating they could be at least $1,000 higher. How might this affect the calculation of the precise time when the cumulative cash flow turns positive? #### Cash Flow Table - **Year (t)** | **Cash Flow ($)** - 0 | (250,000) - 1 | 41,000 - 2 | 48,000 - 3 | 63,000 - 4 | 79,000 - 5 | 88,000 - 6 | 64,000 - 7 | 41,000 #### Options for Consideration: - The project's cumulative cash flow turns positive slightly earlier. - The project's cumulative cash flow now turns positive much later. - The project's cumulative cash flow now turns positive slightly later. - No change. The cumulative cash flow remains positive between year 4 and 5, precisely at 4.22. --- The expectation of higher cash flows for Years 1 and 2 would likely mean the cumulative cash flow would turn positive slightly earlier than currently calculated.
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