Please lend a hand me beside this maths sound out.?
Use excel to evaluate a 5 year wealth investment project beside an initial investment of lb150 million, a residual appeal for the assets at the extension of the project of lb50 million and the following projected sale volumes
Year 1 - 25
Year 2 - 35
Year 3 - 50
Year 4 - 55
Year 5 - 30
If possible, could you please convey me the answer to my email address:
josieyuen(a)hotmail.com
Many Thanks.
Answers:
Put your values across (or anything course you want it). I assume A1=year 1, A2=Year 2 etc
To evaluate a project is unsophisticatedly to find the network present plus of the project. So you own to hold a RRR- required rate of return to discount the lolly flows. I assume 12%
Now dance to Insert - Functions - NPV
In the first box, put 0.12
Go to the second box and select the dosh flows (A1 thru E1). Rememer 150 is incurred in year 0 not in year 1. So we do not select it. Also tag on the remaining 50 to the year 5's amount previously you do this formula (30+50)
Then you'll bring back a NPV of the currency inflows. Deduct from that amount the initial investment of 150. If it is a positive amount, the project can be official.
2. The other prospect is to uss IRR - internal rate of return where on earth you find the rate at which NPV is nothing. It is highly comfortable.
Add year 0 column also and put -150(negative).
Insert - Functions - IRR
Select the selection. Then you will procure a rate. (I get 16%). As long as the RRR is smaller amount than 16%, you can adopt the project.
(I judge some use the word "hurdle rate" for RRR.)
I capture a return on the project of 14.8%.
Do you know what the discount rate is supposed to be? If you pass me that I could transport you a spread sheet.
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Year 1 - 25
Year 2 - 35
Year 3 - 50
Year 4 - 55
Year 5 - 30
If possible, could you please convey me the answer to my email address:
josieyuen(a)hotmail.com
Many Thanks.
Answers:
Put your values across (or anything course you want it). I assume A1=year 1, A2=Year 2 etc
To evaluate a project is unsophisticatedly to find the network present plus of the project. So you own to hold a RRR- required rate of return to discount the lolly flows. I assume 12%
Now dance to Insert - Functions - NPV
In the first box, put 0.12
Go to the second box and select the dosh flows (A1 thru E1). Rememer 150 is incurred in year 0 not in year 1. So we do not select it. Also tag on the remaining 50 to the year 5's amount previously you do this formula (30+50)
Then you'll bring back a NPV of the currency inflows. Deduct from that amount the initial investment of 150. If it is a positive amount, the project can be official.
2. The other prospect is to uss IRR - internal rate of return where on earth you find the rate at which NPV is nothing. It is highly comfortable.
Add year 0 column also and put -150(negative).
Insert - Functions - IRR
Select the selection. Then you will procure a rate. (I get 16%). As long as the RRR is smaller amount than 16%, you can adopt the project.
(I judge some use the word "hurdle rate" for RRR.)
I capture a return on the project of 14.8%.
Do you know what the discount rate is supposed to be? If you pass me that I could transport you a spread sheet.