Question $1$

Busani has asked you for advice about whether he should accept a R$1,000,000$ project. He has given you the project cost and income information in Table $1.$ Use this information to complete the cash flow.

Table $1$: Busani$$s cash flow for a $6-$month contract of R$1,000,000.$

A B C D E

Month Milestone Project expenditure cash flow forecast

Note: All figures in brackets express expenditure Project income cash flow forecast Where Expenditure is higher than income Where Income is higher than expenditure Cumulative Net cash flow

June Project start $($R$80,000)-$

July First payment $($R$120,000)$ R$100,000$

August Second payment $($R$200,000)$ R$150,000$

September Third payment $($R$200,000)$ R$180,000$

October Fourth payment $($R$140,000)$ R$300,000$

November Fifth payment

$($Practical completion$)($R$60,000)$ R$170,000$

$3$ months later Final payment R$100,000$

Total

Question $2$

Use the information in the cash flow to write Busani a brief recommendation on whether to accept the project. There are two important things that he is concerned about:

$1.$ In June, the maximum amount Busani will have access to in terms of working capital is R$90,000.$

$2.$ Busani has already committed to another project in September and cannot provide any further capital to this project from August.

In your recommendation, refer to Busani$$s expected profits, the capital reserves required, months that have higher costs than incomes, and the point at which the project will be self$-$financing.