Question

For a typical project, the cumulative cash flow is zero at the:

• A. end of the project life
• B. break even point
• C. start-up
• D. end of the design stage

Hint:

The break-even point is the point at which the cumulative cash flow is zero, indicating that the project's revenues exactly equal its costs.

Answer 1

The Correct Option is B

Step 1: Understanding cumulative cash flow.
The cumulative cash flow represents the net cash inflows and outflows over the life of the project. The point where the cumulative cash flow is zero is known as the **break-even point**.

Step 2: Explanation of other options.
- (A) **End of the project life**: At the end of the project life, the cash flow would typically be zero if all costs and revenues are accounted for. - (C) **Start-up**: This is the beginning phase, so the cumulative cash flow is usually negative due to initial investments. - (D) **End of the design stage**: At this stage, the project is still in the planning phase, so the cumulative cash flow is likely negative.

Final Answer: \[ \boxed{\text{B) break even point}} \]