Topics
• http://www.santafe.edu/education/csss/csss08/programinfo.php
• Net Present Value
• Internal Rate of Return
• Future Value
• Pension and accumulation problem
• Continuously Compounded Interest
PV and NPV
Discount rate 10%
Present value $379.08 <-- =NPV(B2,B7:B11)
Cash
Year flow
1 100
2 100
3 100
4 100
5 100
Exact NPV problem in Excel
Discount rate 10%
Net present value -20.92 <-- =G7+NPV(G2,G8:G12)
Cash
Year flow
0 -400
1 100
2 100
3 100
4 100
5 100
IRR
IRR 7.931% <-- =IRR(B19:B24)
NPV -20.92 For discount rate 10%
Cash
Year flow
0 -400
1 100
2 100
3 100
4 100
5 100
Multiple Internal Rates of Return
Discount rate 6%
NPV -3.99 <-- =NPV(B3,B9:B13)+B8
Cash
Year flow
0 -145
1 100
2 100
3 100
4 100
5 -275