What are normal and nonnormal cash flows

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As a separate project (Project P), you are considering sponsorship of a pavilion at the upcoming World's Fair. The pavilion would cost $800,000, and it is expected to result in $5 million of incremental cash inflows during its single year of operation. However, it would then take another year and $5 million of costs to demolish the site and return it to its original condition. Thus, Project P's expected net cash flows look like this (in millions of dollars):

The project is estimated to be of average risk, so its cost of capital is 10%.

Year Net Cash Flows

0 -$0.8

1 5.0

2 -5.0

What are normal and nonnormal cash flows?

Reference no: EM133024580

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