Question

Tory invested $600 a year for three years, then $700 a year for an additional four years. In year 9, she withdrew $1,500. She withdrew the entire investment in year 11. Which statement correctly applies to the time line for this problem

Answer 1

Answer:

Cash flows for the first 7 years are negative

Explanation:

When considering cash flows in a business activity or a transaction, it can either be positive or negative cash flow.

Negative cash flow is when the individual or business entity gives out cash to fund a business activity.

Positive cash flow is when cash flows inward from a business activity.

In this scenario Tory invested $600 in the first 3 years and an additional $700 for four years. Cash is going out so this is a negative cash flow within 7 years.

Tory withdrew $1,500 in year 9 and the rest of the investment in year 11. This is a positive cash flow.