Question

A project has an initial cash outflow of $5,000, at time 0, and the following cash flows shown below. This type of project is known as a __________ project.

                                               Year     Cash Inflows

                                                   1          $3,000

                                                   2          $3,000

                                                   3          $3,000

                                                   4          $3,000

                                                   5          $(5,000)

Group of answer choices

mutually-exclusive

normal

contingent

non-normal

Answer 1

Answer: Non-normal

Non-normal cash flows are also called as unconventional cash flow in which the cash flow direction changes more than once.
Here the complete cash flows can be shown as:
Year 0:-$5000
Year 1:$3000
Year 2:$3000
Year 3:$3000
Year 4:$3000
Year 5:-$5000
In cash of normal cash flow the direction will be initial cash outflow followed by future cash inflows.
This is non normal because initial cash outflow is followed by future cash inflows till year 4 and then again cash outflow happened in year 5.