15.401RecitationW1IntrotoExcel Template

.xlsx
1. Calculating compounding interest Option 1 - define each year's balance based on previous year's balance Option 2 - define each year's balance on original balance and number of years worth of interest Interest Ra i 4% 0 1 2 3 4 5 6 7 Option 1 10,000 10,400 10,816 11,249 11,699 12,167 12,653 13,159 Option 2 10,000 10,400 10,816 11,249 11,699 12,167 12,653 13,159 Another way 10,000 10400 Fn + F4 to lock a cell
8 13,686 13,686
FINDING THE DISC. RATE THAT MAKES THE NPV = 0 Assumptions Discount rate 22.5% Projected Cash Flows Year 0 1 2 3 Cash Flow -200 -200 300 300 Present value -200.0 -163.3 200.0 163.3 NPV 0.0 Step 1: Compute NPV Step 2: Compute the discount rate that sets the NPV = 0 (using Goal Seek)
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