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Continental Railroad Company is evaluating three capital investment proposals by using the net present value method. Relevant data related to the proposals are summarized as follows:
Maintenance Equipment Ramp Facilities Computer Network
Amount to be invested $774,777 $453,132 $242,493
Annual net cash flows:
Year 1 $321,000 $215,000 $144,000
Year 2 $299,000 $194,000 $99,000
Year 3 $273,000 $172,000 $72,000

Sagot :

The annual net cash flow is Year 2 $299,000 $194,000 $99,000.

What is cash flow?

When calculating the rate of return or value of a project, cash flows are frequently translated into metrics that provide data about, for instance, the value and status of a company. Internal rate of return and net present value financial models both employ the timing of cash flows into and out of projects as inputs. The change in cash balance over the period is equal to the (total) net cash flow of the company for that time, which is commonly a quarter, half-year, or full year. The change in cash balance is positive if it rises (more cash is made available), and negative if it falls. Net working capital is a measure of how much a company spends or earns on short-term assets like inventory.

Year 1 $321,000 $215,000 $144,000

Year 2 $299,000 $194,000 $99,000

Year 3 $273,000 $172,000 $72,000

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