Exercises / Finance and business maths · 10 of 14
Is the project worth it? NPV
NPV(rate, cash flows) discounts future cash flows to today. It treats the first value as one period away, so the year-0 investment stays outside: =NPV(rate, years 1 to n) + year 0. A positive NPV creates value.
Your taskThe year-0 investment is in B4 (negative) and years 1 to 5 are in B5:B9. In B11, work out the NPV at the discount rate in B1.
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| Row | A | B |
|---|---|---|
| 1 | Discount rate | 9% |
| 2 | ||
| 3 | Year | Cash flow |
| 4 | 0 | -$50,000.00 |
| 5 | 1 | $12,000.00 |
| 6 | 2 | $15,000.00 |
| 7 | 3 | $16,000.00 |
| 8 | 4 | $14,000.00 |
| 9 | 5 | $10,000.00 |
| 10 | ||
| 11 | NPV |