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Finance

Investment projects fall within two types. What are they?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 4QTD

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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

Investment projects fall within two types. What are they?

Expert Solution

Step 1

An investment project is a series of cash inflows and outpourings, normally beginning with a money outflow (the underlying speculation cost) trailed with money inflows as well as money outpourings in later (years) time.

Step 2

The investment projects are classified into two categories based on the cash flows nature as follows:

Conventional cash flow projects: These are the projects in which the cash flow sign will vary only one time. That initial cash outflow and further cash inflows in the coming periods or vice versa.

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