1)Calculate the Cumulative Net amount for this 6-month project. Which month will have the highest demand...

1)Calculate the Cumulative Net amount for this 6-month project. Which month will have the highest demand on your finances? Hint: You are determining what your line of credit amount will be.

2) calculate the interest you will have to pay to cash flow the project. Interest Rate is 5%. Hint: you need to calculate the cumulative monthly amounts to calculate the monthly interest, if any.

Month		Monthly Net
1		$ (28,500)
2		$ (14,760)
3		$ (5,650)
4		$ 200
5		$ 22,690
6		$ 26,020

Expert Solution

Response to part 1)

Month	Monthly net (USD)	Cumulative balance (USD)
1	(28,500)	(28,500)
2	(14,760)	(43,260)
3	(5,650)	(48,910)
4	200	(48,710)
5	22,690	(26,020)
6	26,020	-

Note : Cumulative balance is calculated as follows :
Monthly net amount for current month + cumulative balance for previous month

Month 1 will have the highest demand on the finances as the amount of outflow is the highest.

Response to part 2)

Month	Monthly net (USD)	Cumulative balance (USD)	Interest @ 5%
1	(28,500)	(28,500)	(1,425)
2	(14,760)	(43,260)	(2,163)
3	(5,650)	(48,910)	(2,446)
4	200	(48,710)	(2,436)
5	22,690	(26,020)	(1,301)
6	26,020	-	-

Note :	Interest is taken at 5% and not 5% p.a. as per the question
*Interst = Cumulative balance for current month 5%**

jeff jeffy answered 1 year ago

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