Question

COULD YOU please help me with the forth blank, and actually, I am cofused with market recovery value, and the last two blanks, why the answer is M and N seprately.

Create a cash flow diagram for the following scenario by entering the letter denoting the correct location of the corresponding parameter in the cash flow diagram. For example, A would be the location of a positive cash flow at time 0. An investment of $10,000 at time 0 L will produce uniform annual revenue of $5,220 for two years B , and have a market recovery value of $2,000 C at the end of year 2. Annual expenses will be $3,000 each year M N for operating and maintaining the project. A B C D E F G H I co L M N O P Q R S T

Answer 1

4th Blank will be C as it is market recovery value of the investment at the end of year 2. We will receive $2000 by selling off the Investment i.e it is Positive Cashflow at the end of year 2. So the Blank needs to be the Letter corresponding to Positive Cashflow for 2nd year i.e "C".

The Last two blanks are for Annual Expense of $3000 in each year i.e expense in 1st and 2nd year. It is Negative Cashflow for each year i.e year 1 and 2. So it should be separate for both the years.(As the annual revenue for both years were alloted seperate letters B and C, similarly annual expense for both years should be alloted seperate letters.) The letters should correspond to Negative cashflow for year 1 and 2 i.e "M and N".