s the set of cash flows depicted below normal or nonnormal a

s the set of cash flows depicted below normal or non-normal, and why?

Normal

Non-normal, because there are two changes in sign.

Non-normal, because there are three changes in sign.

Non-normal, because there are four changes in sign.

		Normal
		Non-normal, because there are two changes in sign.
		Non-normal, because there are three changes in sign.
		Non-normal, because there are four changes in sign.

Time Cash Flow -$20,000 $7,500 $8,000 $3

Solution

Option C.) Non-normal, because there are three changes in sign.

First sign change in year 1, the next sign change in year 3 and then in year 4.

Normal Cashflows - Normal cash flows begin with a negative cash flow (or a series of negative cash flows), switch to positive cash flows, and then remain positive. They have only one change in sign. (Note: normal cash flows can also start with positive cash flows, switch to negative cash flows, and then remain negative.)

Non-normal cashflows - Non-normal cash flow stream is a pattern of cash flows in which the direction of cash flows changes more than once. It is also termed as unconventional cash flow.