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:

YearGamma
0(550,000)
11,000,000
2(900,000)
31,500,000

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

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