1
Event 2
LifeCycle Cash Flow Estimates: Key
Costs are assumed positive for the computations. Net incomes show as negative numbers (red numbers) on this page.
Use 0% for the interest rate.
Questions: In each case show the cash flow in each year and total profit.
1.
When the price per job is $1000, how much will profit will Pedro make over the life of the project.
2.
What price must Pedro charge for each job to breakeven (have 0 profit) after five years? Use the Excel Solver to find your answer.
Use Solver to find the breakeven price: $681.54
0
1
2
3
4
5
Profit
Cash Flow
10000
3140
3807
4533
20956
13369
0
3.
Show the cumulative cash flow for the solution of problem 2. The cumulative cash flow is the sum of all cash flows from time 0.
0
1
2
3
4
5
Profit
Cash Flow
10000
3140
3807
4533
20956
13369
0
Cumulative Cash Flow
10000
6860
3053
7586
13369
0
4.
A cash flow problem exists if the cumulative cash flow for any year is negative. The cumulative cash flow is the sum of all cash
flows from time 0. What price does Pedro have to charge per job, so that there is never a negative cumulative cash flow?
This preview has intentionally blurred sections. Sign up to view the full version.
View Full Document
This is the end of the preview.
Sign up
to
access the rest of the document.
 Spring '10
 BARD
 cumulative cash flow

Click to edit the document details