A B C D E F G H

1
2 Discount rate 10% Discount rate 10%
3 Present value $379.08 <-- =NPV(B2,B7:B11) Net present value -20.92 <-- =G7+NPV(G2,G8:G12)
4
5 Cash Cash
6 Year flow Year flow
7 1 100 0 -400
8 2 100 1 100
9 3 100 2 100
10 4 100 3 100
11 5 100 4 100
12 5 100
13
14
15 IRR 7.931% <-- =IRR(B19:B24) LOAN TABLE Division of payment
16 NPV -20.92 between interest
17 Cash =-B19 Principal Payment and return of principal
18 Year flow at beginning at end
19 0 -400 Year of year of year Interest
20 1 100 1 400.00 100 31.72
21 2 100 2 331.72 100 26.31
22 3 100 3 258.03 100 20.46
23 4 100 4 178.50 100 14.16
24 5 100 5 92.65 100 7.35
25
26 =F20-I20 =$B$15*F20
27
 I J K
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<-- =G7+NPV(G2,G8:G12)
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Division
15 of payment
between
16 interest
and 17
return of principal
18
19 Principal
20 68.28 =G20-H20
21 73.69
22 79.54
23 85.84
24 92.65
25
26
27
 A B C D E F G
1
2 Cost 1000
3 IRR? 15.00%
4
5
6 LOAN TABLE Division of payment
7 between interest
8 =-B2 Principal Payment and return of principal
9 at beginning at end
10 Year of year of year Interest Principal
11 1 1000.00 300 150.00 150.00 =C11-D11
12 2 850.00 200 127.50 72.50
13 3 777.50 150 116.63 33.38
14 4 744.13 600 111.62 488.38
15 5 255.74 900 38.36 861.64
16 6 -605.89
17 =B11-E11 =$B$3*B11
18
19
20 Direct calculation of IRR
21
22 Year Cash flow
23 0 -1000
24 1 300
25 2 200
26 3 150
27 4 600
28 5 900
29
30 IRR 24.44% <-- =IRR(B23:B28)
 A B C D E F G H
1 MULTIPLE INTERNAL RATES OF RETURN
2
3 Discount rate 6%
4 NPV -3.99 <-- =NPV(B3,B9:B13)+B8 DATA TABLE
5 Discount
6 Cash rate NPV
7 Year flow -3.99
8 0 -145 0% -20.00
9 1 100 3% -10.51
10 2 100 6% -3.99
11 3 100 9% 0.24
12 4 100 12% 2.69
13 5 -275 15% 3.77
14 18% 3.80
15 21% 3.02
Two IRRs
16 24% 1.62
17 27% -0.24
10.00 30% -2.44
18
19 5.00 33% -4.90
20 36% -7.53
Net present value

0.00
21 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 39% -10.27
-5.00
22
23 -10.00 Note: For a discussion of how
24 -15.00
to create data tables in Excel
25 see Chapter 26.
-20.00
26
27 -25.00
28 Discount rate
29
30
31 Identifying the two IRRs
32 First IRR 8.78% <-- =IRR(B8:B13,0)
33 Second IRR 26.65% <-- =IRR(B8:B13,0.3)
34
35
Table header
36 Data table: Effect of
=NPV(F65,D67:D74)+D66
37 discount rate on NPV.
38 Year Cash flow 1000.00
NPV of Bond Cash
39 0 -800 0% 1000.00
1 100 2% 786.04 12
40
41 2 100 4% 603.96 10
42 3 100 6% 448.39 8
43 4 100 8% 314.93 6
NPV

44 5 100 10% 200.00

4
45 6 100 12% 100.65
2
46 7 100 14% 14.45
8 1100 16% -60.62 0
47
0 2 4 6
48 18% -126.21
Discount r
 8
6

NPV
4
2
0
0 2 4 6
A B C D E F G H
Discount r
49 IRR 14.36% 20% -183.72
50
51 =IRR(D66:D74)
52
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22
te: For a discussion
23 of how
reate data tables
24 in Excel
25
26
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31
32
33
34
35
Table header
36
=NPV(F65,D67:D74)+D66
37
38
NPV of Bond Cash Flows
39
12
40
4110
428
436
NPV

444
45
2
46
470
0 2 4 6 8 10 12
48
Discount rate
 8
6

NPV
4
2
0
0 2 4 6 8 10 12
I J K L
Discount rate
49
50
51
52
 A B C D E F G H
1 MULTIPLE INTERNAL RATES OF RETURN
2
3 Discount rate 6%
4 NPV -3.99 <-- =NPV(B3,B9:B13)+B8 DATA TABLE
5 Discount
6 Cash rate NPV
7 Year flow -3.99
8 0 -145 0% -20.00
9 1 100 3% -10.51
10 2 100 6% -3.99
11 3 100 9% 0.24
12 4 100 12% 2.69
13 5 -275 15% 3.77
14 18% 3.80
15 21% 3.02
Two IRRs
16 24% 1.62
17 27% -0.24
10.00 30% -2.44
18
19 5.00 33% -4.90
20 36% -7.53
Net present value

0.00
21 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 39% -10.27
-5.00
22
23 -10.00
24 -15.00
25
-20.00
26
27 -25.00
28 Discount rate
29
30
31 Identifying the two IRRs
32 First IRR 8.78% <-- =IRR(B8:B13,0.1)
33 Second IRR 26.65% <-- =IRR(B8:B13,0.5)
34
35
Table header
36 Data table: Effect of
=NPV(F65,D67:D74)+D66
37 discount rate on NPV.
38 Year Cash flow 1000.00
NPV of Bond Cash
39 0 -800 0% 1000.00
1 100 2% 786.04 12
40
41 2 100 4% 603.96 10
42 3 100 6% 448.39 8
43 4 100 8% 314.93 6
NPV

44 5 100 10% 200.00

4
45 6 100 12% 100.65
2
46 7 100 14% 14.45
8 1100 16% -60.62 0
47
0 2 4 6
48 18% -126.21
Discount r
 8
6

NPV
4
2
0
0 2 4 6
A B C D E F G H
Discount r
49 IRR 14.36% 20% -183.72
50
51 =IRR(D66:D74)
52
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Table header
36
=NPV(F65,D67:D74)+D66
37
38
NPV of Bond Cash Flows
39
12
40
41
10
428
436
NPV

444
45
2
46
470
0 2 4 6 8 10 12
48
Discount rate
 8
6

NPV
4
2
0
0 2 4 6 8 10 12
I J K L
Discount rate
49
50
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 A B C D E F G H I
1 BOND CASH FLOWS
2
Table header
3 Year Cash flow Data table: Effect of
=NPV(F5,B5:B12)+B4
4 0 -800 discount rate on NPV
5 1 100 1000.00
6 2 100 0% 1000.00 NPV of Bond Cash Flo
7 3 100 2% 786.04 1200
8 4 100 4% 603.96 1000
9 5 100 6% 448.39 800
10 6 100 8% 314.93 600

NPV ($)
11 7 100 10% 200.00 400
12 8 1100 12% 100.65 200
13 14% 14.45 0
14 IRR 14.36% <-- =IRR(B4:B12) 16% -60.62 -200 0% 5% 10% 15%

15 18% -126.21 -400

16 20% -183.72 Discount rate
17
 J K L M
1
2
Table header
3
=NPV(F5,B5:B12)+B4
4
5
6NPV of Bond Cash Flows
1200 7
1000 8
800 9
600 10
NPV ($)

400 11
200 12
0 13
-200 0%14 5% 10% 15% 20% 25%
-400 15
16 Discount rate
17
 A B C D E F G H
1 FLAT PAYMENT SCHEDULES
2
3 Loan principal 10,000
4 Interest rate 7%
5 Loan term 6 <-- Number of years over which loan is repaid
6 Annual payment 2,097.96 <-- To be made at end of each year
7
8 Principal Payment Split payment into:
Year at begin. at end of Return of =$B$4*C11
9
10 of year year Interest principal
11 1 10,000.00 2,097.96 700.00 1,397.96
12 2 8,602.04 2,097.96 602.14 1,495.82 =D11-E11
13 3 7,106.23 2,097.96 497.44 1,600.52
=C11-F11
14 4 5,505.70 2,097.96 385.40 1,712.56
15 5 3,793.15 2,097.96 265.52 1,832.44
16 6 1,960.71 2,097.96 137.25 1,960.71
 A B C D E F
1 SIMPLE FUTURE VALUE
2
3 Interest 10%
4
5 Year Account Interest Total in
6 balance earned account
7 beg. year during year end of year
8 0 1,000.00 100.00 1,100.00 <-- =C8+B8
9 1 1,100.00 110.00 1,210.00
10 2 1,210.00 121.00 1,331.00
=$B$3*B8
11 3 1,331.00 133.10 1,464.10
12 4 1,464.10 146.41 1,610.51
13 5 1,610.51 161.05 1,771.56
14 6 1,771.56 177.16 1,948.72
15 7 1,948.72 194.87 2,143.59
16 8 2,143.59 214.36 2,357.95
17 9 2,357.95 235.79 2,593.74
18 10 2,593.74
19
=D8
20
21 A simpler way 2593.74 <-- =1000*(1+B3)^10
 A B C D E F G
1 FUTURE VALUE WITH ANNUAL DEPOSITS
2
3 Interest 10%
4
5 Year Account Deposit at Interest Total in
6 balance beginning earned account
7 beg. year of year during year end of year
8 0 0.00 1,000 100.00 1,100.00 <-- =D8+C8+B8
9 1 1,100.00 1,000 210.00 2,310.00
10 2 2,310.00 1,000 331.00 3,641.00 =$B$3*(C8+B8)
11 3 3,641.00 1,000 464.10 5,105.10
12 4 5,105.10 1,000 610.51 6,715.61
13 5 6,715.61 1,000 771.56 8,487.17
14 6 8,487.17 1,000 948.72 10,435.89
15 7 10,435.89 1,000 1,143.59 12,579.48
16 8 12,579.48 1,000 1,357.95 14,937.42
17 9 14,937.42 1,000 1,593.74 17,531.17
18 10 17,531.17
19 =E8
20
21 Future value $17,531.17 <-- =FV(B3,A18,-1000,,1)
 A B C D E F
1 A RETIREMENT PROBLEM
2
3 Interest 8%
4 Annual deposit 48,000
5 Annual retirement withdrawal 30,000
6
7 Year Account Deposit at Interest Total in
8 balance beginning earned account
9 beg. year of year during year end of year
10 0 0.00 48,000 3,840.00 51,840.00
11 1 51,840.00 48,000 7,987.20 107,827.20
12 2 107,827.20 48,000 12,466.18 168,293.38
13 3 168,293.38 48,000 17,303.47 233,596.85
14 4 233,596.85 48,000 22,527.75 304,124.59
15 5 304,124.59 -30,000 21,929.97 296,054.56
16 6 296,054.56 -30,000 21,284.36 287,338.93
17 7 287,338.93 -30,000 20,587.11 277,926.04
18 8 277,926.04 -30,000 19,834.08 267,760.12
19 9 267,760.12 -30,000 19,020.81 256,780.93
20 10 256,780.93 -30,000 18,142.47 244,923.41
21 11 244,923.41 -30,000 17,193.87 232,117.28
22 12 232,117.28 -30,000 16,169.38 218,286.66
23
24 Numerator 126,718.54 <-- =1/(1+B3)^4*PV(B3,8,-30000)
25 Denominator 4.31 <-- =PV(B3,5,-1,,1)
26 Annual deposit 29,386.55 <-- =B24/B25
 G H I
1
2
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4
5
6 =$B$3*(D10+C10)
7
8
9
10 <-- =E10+D10+C10
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 A B C D E F
1 MULTIPLE COMPOUNDING PERIODS
2
3 Initial deposit 1,000 =B3*EXP(B4)
4 Interest rate 5%
5 Number of compounding periods per year 2 Number End-year
6 Interest per compounding period 2.500% of periods accretion
7 Accretion in one year 1050.625 per year 1050.625
8 Continuous compounding with Exp 1051.271 1 1050.000
9 2 1050.625
10 10 1051.140
11 Effect of Multiple Compounding 20 1051.206
12 Periods 50 1051.245
13 1051.50
100 1051.258
14 150 1051.262
1051.00
End-year accretion

15 300 1051.267
16 1050.50 800 1051.269
17 1050.00
18 1049.50
19 1049.00
20 1 10 100 1000
21
Number of compounding intervals
22
23
24 Interest 8%
25 Continuously
26 Year Cash flow discounted PV
27 1 100 92.312 <-- =EXP(-$C$24*C27)*D
28 2 200 170.429
29 3 300 235.988
30 4 350 254.152
31 5 400 268.128
32
33 Present value 1021.009 <-- =SUM(E27:E31)
34
35
36
37 Initial deposit 1,000
38 End-of-year value 1,200
39 Number of compounding periods 2
40 Implied annual interest rate 19.089% <-- =((B38/B37)^(1/B39)-1)*B39
41
42 Continuous return 18.232% <-- =LN(B38/B37)
43
44
45
46
47
 G H I J K L
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<-- =EXP(-$C$24*C27)*D27
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32
<-- =SUM(E27:E31)
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36
37 Annual rate with
38 n compounding periods
39
40 19.089% <-- =B40 : data table header
41 1 20.000%
42 2 19.089% Note: The construction
43 4 18.654% of data tables is discussed
44 8 18.442% in Chapter 26.
45 20 18.316%
46 50 18.265%
47 100 18.249%