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Question Two [6 marks] (a) Use an EXCEL spread sheet to calculate the Net Present Value...

Question Two [6 marks]
(a) Use an EXCEL spread sheet to calculate the Net Present Value and Discounted Payback Period of the following project at 20.00% per annum e?ective. [4 marks]
Date Cash flow
25/08/2000 -1,000,000
25/11/2000 -100,000
25/03/2001 160,968
25/09/2001 161,936
25/03/2002 162,904
25/09/2002 163,872
25/03/2003 164,840
25/09/2003 165,808
25/03/2004 166,776
25/09/2004 167,744
25/03/2005 168,712
25/09/2005 169,680
(b) Use your spread sheet to determine the internal rate of return correct to 0.1% per annum. [2 marks]
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Answer #1

a) We are using Excel function XNPV, to calculate the Net present value of cash flows (as dates are given)

Net Present Value = -79584.60

As the project has a negative NPV, it will not have a discounted payback period because the initial outlay will never be fully recovered.

b) For calculating the IRR i.e., Internal rate of return for the project we use the excel function - XIRR

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