Class1NPV 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 Click on each cell to observe the formula
8 13,686 13,686
CALCULATING THE NPV OF FUTURE CASH FLOWS Assumptions Discount rate 5% Cash Flow by Strategy Year 0 1 2 3 Cash Flow - Strategy A -1,000 500 400 300 Cash Flow - Strategy B -200 -200 300 300 NPV Calculations Discount rate 1.000 1.050 1.103 1.158 Present value of cash flows - A -1,000 476 363 259 Present value of cash flows - B -200 -190 272 259 Total PV - A 98.2 Total PV - B 140.8
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