Question

A defense contract company has just won a contract for $5.25 million. If work is completed...

A defense contract company has just won a contract for $5.25 million. If work is completed on schedule it will receive a series of progress payments. The first $250,000 will be received 15 days after the contract is signed. Further payments of $500,000 each will be received at 60, 90, and 180 days. The remaining $3.5 million will be received 360 days after the contract is signed. If the company's interest rate is 7.5% what is the present worth of the progress payments on the contract signing date of November 10, 2018?

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Answer #1

Using XNPV function in Excel

interest 7.5%
initial investment 0 10-11-2018
1st Payment 250000 25-11-2018
2nd Payment 500000 09-01-2019
3rd Payment 500000 08-02-2019
4th Payment 500000 09-05-2019
5th Payment 3500000 05-11-2019
PW using XNPV function 4976034.72

Showing formula in excel

interest 0.075
initial investment 0 10-11-2018
1st Payment 250000 =C13+15
2nd Payment 500000 =C13+60
3rd Payment 500000 =C13+90
4th Payment 500000 =C13+180
5th Payment 3500000 =C13+360
PW using XNPV function =XNPV(B12,B13:B18,C13:C18)
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