Great Lakes Clinic has been asked to provide exclusive healthcare services for next year's World Exposition. Although flattered by the request, the clinic's managers want to conduct a financial analysis of the project. There will be an up-front cost of $160,000 to get the clinic in operation. Then, a net cash inflow of $1 million is expected from operations in each of the two years of the exposition. However, the clinic has to pay the organizers of the exposition a fee for the marketing value of the opportunity. This fee, which must be paid at the end of the second year, is $2 million. a. What are the cash flows associated with the project

Respuesta :

The cash flow that is associated with this project are:

  • -$160000
  • $1000000
  • -$1000000

What is a cash flow?

This term is used to refer to the net cash that is moved in or out of a business at a particular time.

Cash flow for year 0

The initial cash flow = -$160000

cash flow = -$160000

Cash flow for year 1

This is the net cash flow = $1000000

Cash flow in the second year

Net cash flow minus organiners fee

= 1000000- 2000000

= -$1000000

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