Non-Normal Cash Flow
Non-normal cash flow stream (also called unconventional cash flow) 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.
Non-normal cash flow stream leads to what is called multiple-IRR problem.
Example
Alpha Beta is analyzing cash flows stream of Project Gamma which is given below:
Year | Gamma |
---|---|
0 | (550,000) |
1 | 1,000,000 |
2 | (900,000) |
3 | 1,500,000 |
The project has non-normal cash flow stream because cash flows change direction thrice (in Year 1, 2 & 3).
by Obaidullah Jan, ACA, CFA and last modified on