Answer:
The correct answer is Cash deficit = ($804,000) and incorrect.
Explanation:
According to the scenario, the calculation can be done as follows:
Cash Flow Statement
Beginning cash = $1,200,000
Now we less the asset buildup, then
Less: Assets buildup (1200000-600000)*50% = -$300,000
Now by adding the profit, then
Add: Profit (1200000*8%) = $96,000
Cash deficit = ($804,000)
As his earning seems unable to cover additional capital expenditure, his optimistic outlook for his cash position appear to be incorrect.
