Profitability cum Cash Flow (Developer)

INFLOWS
I.
II
III.
V

Rs./Crores
Yr 1

Group Housing
Total Realisation
Recovery of External Dev Cost
Recovery of Infrastructure Dev Cost
Promoter Contribution
Total Inflow (I to V)

OUTFLOWS
Non Refundable Deposits

12.00
12.00
Yr 1

Yr 2

Yr 3

Yr 4

Yr 5

161.61
161.61

161.61
161.61

161.61
161.61

161.61
161.61

210.09
210.09

210.09

161.61

161.61

161.61

(12.00)
149.61

Yr 2

Yr 3

Yr 4

Yr 5

Total

Total

11.11

Construction Cost

856.53
856.53
856.53

11.11
82.80

82.80

82.80

82.80

107.04

Land Cost (Collabration Share)

438.24
-

External Dev.Cost

31.12

31.12

31.12

31.12

31.12

155.60

Innitialy

-2.22

-2.22

-2.22

-2.22

-2.22

(11.10)

Infrastructure Dev Charges

Conversion Charges

Project Overhead Costs

Marketing Costs
Total Cash Outflow
Surplus/(Deficit)
Cumulative Surplus/(Deficit)
348% IRR of Project
116 NPV (@14%)

3.23

3.23

3.23

3.23

4.20

17.13

11.11

8.08
123.01

8.08
123.01

8.08
123.01

8.08
123.01

10.50
150.65

42.83
653.81

0.89
0.89

38.60
39.49

38.60
78.08

38.60
116.68

26.60
143.28

59.44
202.72

202.72

(11.11)

38.60

38.60

38.60

38.60

59.44

202.72

102432482.xls.ms_office

NPV AND IRR RULES

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22

A
B
C
NPV RULE FOR CAPITAL BUDGETING

Choose a project if it costs less than the PV of its cash flows. More generally:
take a project if its Net Present Value is positive.
EXAMPLE

Interest rate
Year
Cash flow
PV factor
PV of cash flow
Cumulative PV
Net Present Value

10%
0

(600)
100%
(600)
(600)
123

200
91%
182
(418)

200
83%
165
(253)

500
75%
376
123

Investors would have to invest 123 more (a total of 723) to get the cash flows of 200, 200,
and 500 at an interest rate of 10%. Therefore the project has a value of 123 for investors.
The interest rate is called the cost of capital, because it is the opportunity cost of funds - the
rate investors can earn on alternative investments.

Page 2

NPV AND IRR RULES

A
1
2
3
4
5
6
7
8
9
10

IRR RULE

For a standard project,

IRR Rule:

NPV > 0

Choose a project

if and only if

IRR > Cost of Capital

if and only if

IRR > Cost of Capital

Standard means
- cash outflows occur in early years and cash inflows in later years.
- the alternative to the project is the status quo.

Page 3

NPV AND IRR RULES

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20

A
B
C
D
NONSTANDARD PROJECTS MAY HAVE MORE THAN ONE INTERNAL RATE OF RETURN

Cost of capital

Year

12%

Net cash flow

PV factor
PV of net cash flow
Cumulative PV
Net present value

(400,000)
960,000
(572,000)
100%
89%
80%
(400,000)
857,143
(455,995)
(400,000)
457,143
1,148
1,148
Rs. 1,025
IRR (Internal Rate of Return)
10%
10%
For this project, varying the initial guess in the IRR function can cause the IRR to change.
This is a good project (positive NPV), but you can't tell it from the IRR function. The following
chart shows that there are two break-even costs of capital or IRR's. The NPV is positive at the
actual cost of capital (12%), so it is a good project.

Page 4

NPV AND IRR RULES

0
(400,000)

1
960,000

20%

40%

2
(572,000)

NPV
(8,612)
(5,769)
(3,418)
(1,509)
1,148
1,970
2,497
2,758
2,778
2,580
2,185
1,612
879
(1,010)
(2,139)
(3,374)
(4,705)
(6,122)

4,000
2,000
Net Present Value

A
1 Year
2 Net cash flow
3
4 Discount Rate
5
6
2%
7
4%
8
6%
9
8%
10
10%
11
12%
12
14%
13
16%
14
18%
15
20%
16
22%
17
24%
18
26%
19
28%
20
30%
21
32%
22
34%
23
36%
24
38%
25
40%

0%
(2,000)
(4,000)
(6,000)
(8,000)
(10,000)
Discount Rate

Page 5

60%

NPV AND IRR RULES

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19

A
B
C
D
AN EXAMPLE OF MUTUALLY EXCLUSIVE PROJECTS
Cost of capital

10%
Year

Project A

Cash flow
PV factor
PV of cash flow
NPV
IRR

(10,000)
100%
(10,000)
8,182
100%

20,000
91%
18,182

Project B

Cash flow
PV factor
PV of cash flow
NPV
IRR

(20,000)
100%
(20,000)
11,818
75%

35,000
91%
31,818

Project B is best, even though its IRR is lower.

Page 6

NPV AND IRR RULES

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18

A
B
C
D
E
PROJECTS CAN BE VALUED ON AN INCREMENTAL BASIS

Cost of capital

10%
Year

Project A

Cash flow
PV factor
PV of cash flow
NPV

(10,000)
100%
(10,000)
8,182

20,000
91%
18,182

Project B-A

Cash flow
PV factor
PV of cash flow
NPV

(10,000)
100%
(10,000)
3,636

15,000
91%
13,636

Project B has a positive NPV relative to A (on an incremental basis) so should be taken.

Page 7

NPV Calculator
Add custom cash flows or create auto-generated cash flow series (uniform, gradient, and exponential series).
You can delete, copy, and insert new columns, but make sure the Sum column is correct after making changes.
The Net Present Value for each series is calculated, along with the Total NPV. Edit the light-blue cells.
The IRR function is used to calculate the overall Internal Rate of Return. It requires an initial guess.

NPV 14,649.49
IRR
9.054%
Discount Rate (i)

Series Type:
Value (A, G, or Eo):
g (for Exp Grad):
Periods:
NPV:

Period
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40

Sum

Rs. 13,820.27
9%

6%
Auto-Generated Cash Flow Series
Uniform (A)
Gradient (G)
Exp Grad
100
100
100
5%
5
10
7
421.24
2,960.23
674.08

Series 1

(150,000.00)
18,205.00
36,710.25
42,615.76
52,321.55
55,627.63
(8,365.99)
740.71
700.00
800.00
900.00
-

Financial Calculators by Vertex42.com

100.00
100.00
100.00
100.00
100.00
-

Series 2
100.00
200.00
300.00
400.00
500.00
600.00
700.00
800.00
900.00
-

Series 3
105.00
110.25
115.76
121.55
127.63
134.01
140.71
-

none

IRR:

Series 4
-

2,148.66
16.34%

Custom Cash Flow Series

4,471.70
(1,872.95)
9.63%
4.14%

5,846.53
8.66%

Label 1

Label 2

Label 3

Label 4

(10,000.00)
3,000.00
4,200.00
6,800.00

(40,000.00)
8,000.00
9,200.00
10,000.00
12,000.00
14,500.00

(40,000.00)
8,000.00
9,200.00
10,000.00
12,000.00
14,500.00
(9,000.00)

(70,000.00)
12,000.00
15,000.00
18,000.00
21,000.00
26,000.00

2009 Vertex42 LLC

XIRR, XNPV Calculator

This worksheet uses the XNPV function to calculate the Net Present Value
for a schedule of cash flows that are not necessarily periodic. The XNPV
function requires the Analysis ToolPak add-in (see Help on XNPV function).
It assumes 365 days in the year. The XIRR function is used to calculated
the Internal Rate of Return. The dates do not need to be in order. You can
have multiple cash flows with the same date.

Discount Rate

8%

NPV
IRR

2,180.51
37.34%

Using Dynamic Ranges

Date
1/1/08
3/1/08
10/30/08
2/15/09
4/1/09

Value
(10,000.00)
2,750.00
4,250.00
3,250.00
2,750.00

Financial Calculators by Vertex42.com

NPV
IRR

2,180.51
37.34%

Using the Exact Range

Date
1/1/08
3/1/08
10/30/08
2/15/09
4/1/09

Value
(10,000.00)
2,750.00
4,250.00
3,250.00
2,750.00

2009 Vertex42 LLC

HELP

Days in Year
NPV

365

2,180.51

Using an Array Formula

Date
1/1/08
3/1/08
10/30/08
2/15/09
4/1/09

Value
(10,000.00)
2,750.00
4,250.00
3,250.00
2,750.00

2009 Vertex42 LLC