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
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
Problem 1PS
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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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