Exists where the likelihood of occurrence of certain events are unknown. Forecasting cash flows can be very difficult to do accurately and all projects involve an element of uncertainty ie where the likelihood of occurrence of certain events are unknown. This is because there are numerous factors outside a business’s control and, although a decision to invest today may be appropriate (given the current market conditions and economic climate), market and economic conditions may change and have a negative (or positive) effect on a project that requires considerable investment. For example, with regard to the market, consumers can be fickle and the introduction of a new competitor may prevent a business achieving its original sales revenue target, thus making its sales forecasts inaccurate, and ultimately preventing a business recouping the cost of its original investment. Likewise any change in interest rates could also affect both a business’s forecast for sales (cash inflows) as well as its costs (cash outflows), if it has funded the investment on borrowed capital. The more unstable the business environment, the greater the uncertainty over the cash flow figures.