Question

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?

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)