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Please use excel, need help with functions and setting up cash flows in Excel because I...

Please use excel, need help with functions and setting up cash flows in Excel because I am only used to using a financial calculator, thanks!

You are offered an asset costing $900 that has cash flows of $200 at the end of each of the next 10 years. If the appropriate discount rate for the asset is 12%, should you purchase it based on its NPV? What is the IRR of the asset?

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Answer #1

We shall first enter the cash flows in excel:

Year Cash flows
0 $ (900.00)
1 $   200.00
2 $   200.00
3 $   200.00
4 $   200.00
5 $   200.00
6 $   200.00
7 $   200.00
8 $   200.00
9 $   200.00
10 $   200.00
NPV $   230.04
IRR 17.96%

Now NPV formula can be seen in screenshot below.

=I8+NPV(0.12,I9:I18)

Here I8 is the initial cash flow. Remember to keep year zero cash flow first and then apply NPV formula for other cash flows

Book1 - Excel Imran Khan File Home Insert Page Layout Formulas Revie View Add-ins HelpTell me what you want to do share comments Σ AutoSum . A ドA Copy stormat Painter | B 1 . . 2- Merge & Center . | $ . % , il Conditional Format as Cell Formatting Table Styles nsert Delete Format Sort & Find & Filter-Select Clear- Clipboard Alignment Number Editing ˇ 丘 一8tNPV(0.12,19:118) ear Cash flows ol $(900.00 1$ 200.00 2S 200.00 3$ 200.00 $ 200.00 5 $ 200.00 6 S 200.00 $200.00 200.00 9 200.00 10l $ 200.00 10 17 NPV 118 21 IRR 17.96% Sheet1Sheet2 Sheet3 3:38 AM O Type here to search 1/17/2019Book1 - Excel Imran Khan File Home Insert Page Layout Formulas Revie View Add-ins HelpTell me what you want to do share comments Σ AutoSum . A ドA Percentage Merge & Center . | $ . % , il Paste Conditional Format as Cell Formatting Table Styles nsert Delete Format Sort & Find & Filter-Select Format Painter Clear- Clipboard Alignment Number Editing ear Cash flows o$(900.00) 1$ 200.00 2 200.00 3$ 200.00 $ 200.00 5 $ 200.00 6 S 200.00 S 200.00 200.00 9$ 200.00 10l $ 200.00 10 17 230.04 IRR(18:I18 NPV Screenshot saved The screenshot was added to your OneDrive. IRR Sheet1Sheet2 Sheet3 O Type here to search 3:38 AM 1/17/2019

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