Finding present worth given a cash flow series consisting of uniform series A and a single amount F at n: PV(i%,n,A,F)

Note: 1. use appropriate time units and interest rate

2. Excel solves this equation: P + A(P/A,i,n) + F(P/F,i,n) = 0 Consequently, if A and F are costs (negative amounts), then P is a revenue (positive amount). In other words, sign of If the function is used as a part of a larger calculation, make sure to flip the sign, i.e. use -PV(i%,n,A,F) Ex. Find the present worth of an 10 year alternative that has $1500 intial cost, AOC of $50 and salvage value ($1,768.67) < Formula reads "= -1500 -PV(10%,10,-50,100)"

(Proper signs are given to the cash flow, and n The amount at zero is explicitly added with pr

Finding present worth for an arbitrary cash flow series. NPV(rate,value1,value2, ...)

Note: 1. use appropriate time units and interest rate 2. Value1, value2, ... end of period amounts. 3. NPV uses the order of value1, value2, ... to interpret the order of cash flows. Be sure to enter your payment and in 4. Excel solves the equation: P = value1(P/F,i,1) + value2(P/F,i,2) + . + valueN(P/F,i,N) Ex. Find the present worth of an 10 year alternative that has $1500 intial cost, AOC of $50 and salvage value EOY 0 1 2 3 4 5 NCF -1500 -50 -50 -50 -50 -50

($1,768.67) < Formula reads" =-1500+NPV(10%,B38:B47)" (amount at 0 is co

6 7 8 9 10

-50 -50 -50 -50 50

ngle amount F at n:

nt). In other words, sign of the equivalent PW is reversed. PV(i%,n,A,F)

of $50 and salvage value of $100 at an MARR of 10%.

ven to the cash flow, and negative sign in front of PV as stated in note 2. is explicitly added with proper sign)

enter your payment and income values in the correct sequence. Input 0 for periods when there are no cash flows.

of $50 and salvage value of $100 at an MARR of 10%.

8:B47)" (amount at 0 is considered separately, no flipping of sign is required)

re no cash flows.

Finding future worth given a cash flow series consisting of uniform series A and a single amount P at 0: FV(i%,n,A,P) Note: 1. use appropriate time units and interest rate

2. Excel solves this equation: P(F/P,i,n) + A(F/A,i,n) + F = 0 Consequently, if A and P are costs (negative amounts), then F is a revenue (positive amount). In other words, sign of If the function is used as a part of a larger calculation, make sure to flip the sign, i.e. use -FV(i%,n,A,F)

Ex. Find the future worth of an 10 year alternative that has $1500 intial cost, AOC of $50 and salvage value o ($4,587.48) < Formula reads "=100 -FV(10%,10,-50,-1500)"

(Proper signs are given to the cash flow, and neg The amount at n=10 is explicitly added with prop

single amount P at 0:

mount). In other words, sign of the equivalent FW is reversed. e -FV(i%,n,A,F)

C of $50 and salvage value of $100 at an MARR of 10%.

ven to the cash flow, and negative sign in front of FV as stated in note 2. 0 is explicitly added with proper sign)

Finding annual worth given a single amount P at 0 and another single amount F at n: PMT(i%,n,P,F)

Note: 1. use appropriate time units and interest rate

2. Excel solves this equation: P(A/P,i,n) + A + F(A/F,i,n) = 0 Consequently, if P and F are costs (negative amounts), then A is a revenue (positive amount). In other words, sign of If the function is used as a part of a larger calculation, make sure to flip the sign, i.e. use -PMT(i%,n,A,F)

Ex. Find the annual worth of an 10 year alternative that has $1500 intial cost, AOC of $50 and salvage value o

($287.84) < Formula reads "= -50 -PMT(10%,10,-1500,100)" (Proper signs are given to the cash flow, and negative sign in front of PMT as The AOC amount is explicitly added with proper sign)

nt). In other words, sign of the equivalent AW is reversed. PMT(i%,n,A,F)

of $50 and salvage value of $100 at an MARR of 10%.

ve sign in front of PMT as stated in note 2.

Payback period given a single initial amount P at 0, uniform payments of A and a single amount F at n for ev NPER(i%,n,P,F)

Note: 1. use appropriate time units and interest rate 2. Excel solves this equation (for the unknown "n"): P + A(P/A,i,n) + F(P/F,i,n) = 0

Ex. Determine the payback period for an asset that has a first cost of $40,000, a salvage value of $8000 anytime within 10 years of its purchase, and generates income of $6000 per year. The required return is 8% p 8.44 < Formula reads "=NPER(8%,6000,-40000,8000)" (Proper signs are given to the cash flow.)

We're solving this equation:

0 = - 40,000 + 6000(P/A,8%,n) + 8000(P/F,8%,n) Try n = 9: 0 +1483 Try n = 8: 0 -1198 n is between 8 and 9 years What happens if n was 11 or more years?

Under the assumption that the payback period we would find is withing 10 years!

Ex. Find how long it takes to pay off $1500 if you pay $100 in year 1, $110 in year 2 and increase payments in this fash Assume 15% interest rate.

This example is to demonstrate the use of "goal seek" tool of excel, which can be used to solve and find a root of sing We're trying to solve the following equation: 1500 = 100(Pg/A1, g=10%,i=15%,n) We need to find n such that the expression : Use Goal Seek g (%) = 10 (Pg/A1, g=10%,i=15%,n) attains the value of 15.

i (%) = n= (Pg/A,g,i,n) = g != i (Pg/A,g,i,n) = g=i

15 1 0.869565

1. Select Tools > Goal Seek 2. Set Cell is the cell containing the function value as an excel formula- her 3. To value: 4. By changing cell containing n value i.e. B49

Note: You may have to add-in goal seek option from the tools menu if it is n 0

ingle amount F at n for every n:

vage value of $8000 he required return is 8% per year.

rease payments in this fashion by 10% from year to year.

solve and find a root of single variable functions.

e value of 15.

value as an excel formula- here it is B51 containing the factor expression.

on from the tools menu if it is not available.

Year 0 1 2 3 4 5 6 7 8 9 10

Cash Flow -5000 100 100 100 100 100 100 100 100 100 7100

Year 0 1 2 3 4 5 IRR =>

Cash Flow -1000 0 0 500 0 1500 16.90%

RATE => N/A

IRR => RATE =>

5.16% 5.16% (single cell function applicable when cash flows only have P,F,A)

Use "help" to read about these functions. A search for Financial Functions in Excel will provide you with a list of built-in functions that you can use.