npv analysis spreadsheet
DESCRIPTION
NPV calculation on excel spreadsheet. NPV, IRR, IRR-differential, calculation and explanation.TRANSCRIPT
Question 1:
Option 1 Purchase without Finance
Cost of Capital 10%
0 -11,400,000 0 0 -11,400,000 1.000 -11,400,0001 0 70,949 0 70,949 0.909 64,4992 0 80,300 0 80,300 0.826 66,3643 0 80,300 0 80,300 0.751 60,3314 0 80,300 0 80,300 0.683 54,8465 0 80,300 0 80,300 0.621 49,8606 0 80,300 0 80,300 0.564 45,3277 0 80,300 0 80,300 0.513 41,2078 0 80,300 0 80,300 0.467 37,4619 0 80,300 11,870,074 11,950,374 0.424 5,068,125
Total -11,400,000 713,349 -11,007,851 -5,911,981
NPV -5,911,981 5,488,019IRR 1.13%MCR (Max Capital at Risk) 11,400,000B/C (Benefit to Cost ratio) 0.481
Option 2 Purchase with FinanceCost of Capital 10%
0 -3,579,000 0 0 -3,579,000 1.000 -3,579,0001 0 -503,617 0 -503,617 0.909 -457,8342 0 -505,025 0 -505,025 0.826 -417,3763 0 -510,180 0 -510,180 0.751 -383,3064 0 -515,763 0 -515,763 0.683 -352,2735 0 -521,809 0 -521,809 0.621 -324,0026 0 -528,357 0 -528,357 0.564 -298,2447 0 -535,449 0 -535,449 0.513 -274,7708 0 -543,129 0 -543,129 0.467 -253,3749 0 -551,446 5,727,858 5,176,412 0.424 2,195,304
Total -£3,579,000 -£4,714,775 -£6,135,394 -£4,144,874
NPV -4,144,874 -565,874IRR -6.21%MCR (Max Capital at Risk) 6,340,178B/C (Benefit to Cost ratio) 0.346
Option 2 LeaseCost of Capital 10%
0 0 0 0 0 1.000 01 0 -660,000 0 -660,000 0.909 -600,0002 0 -660,000 0 -660,000 0.826 -545,455
Years Discounted
Capital Investment
Project's Cash Flows
(AT)Residual
valueNet Cash
flows (AT)Discount
factorPresent Value of Cash flows
Years Discounted
Capital Investment
Project's Cash Flows
(AT)Residual
valueNet Cash
flows (AT)Discount
factorPresent Value of Cash flows
Years Discounted
Capital Investment
Project's Cash Flows
(AT)Residual
valueNet Cash
flows (AT)Discount
factorPresent Value of Cash flows
3 0 -660,000 0 -660,000 0.751 -495,8684 0 -660,000 0 -660,000 0.683 -450,7895 0 -660,000 0 -660,000 0.621 -409,8086 0 -726,000 0 -726,000 0.564 -409,8087 0 -726,000 0 -726,000 0.513 -372,5538 0 -726,000 0 -726,000 0.467 -338,6849 0 -726,000 0 -726,000 0.424 -307,895
Total 0 -6,204,000 -3,300,000 -3,930,859
NPV -3,930,859
Amounts in $
-11,400,000-11,335,501-11,269,137-11,208,807-11,153,961-11,104,101-11,058,773-11,017,567-10,980,106
-5,911,981
Amounts in $
-3,579,000-4,036,834-4,454,210-4,837,515-5,189,789-5,513,791-5,812,035-6,086,805-6,340,178-4,144,874
Amounts in $
0-600,000
-1,145,455
Cum. discounted cash flow
Cum. discounted cash flow
Cum. discounted cash flow
-1,641,322-2,092,111-2,501,919-2,911,727-3,284,280-3,622,964-3,930,859
Present Value of Cash flowsPV = Cash Flow / (1 + r) ^ t
End of Year Lease Lease Purchase vs lease
1 -11400000 -3579000 0 0 -11,400,000 -3,579,000 0 -78210000
2 70,949 -503617 -660000 1 64,499 -457,834 -600,000 574566
3 80,300 -505025 -660000 2 66,364 -417,376 -545,455 585,325
4 80,300 -510180 -660000 3 60,331 -383,306 -495,868 590480
5 80,300 -515763 -660000 4 54,846 -352,273 -450,789 596063
6 80,300 -521809 -660000 5 49,860 -324,002 -409,808 602109
7 80,300 -528357 -726000 6 45,327 -298,244 -409,808 608657
8 80,300 -535449 -726000 7 41,207 -274,770 -372,553 615749
9 80,300 -543129 -726000 8 37,461 -253,374 -338,684 623429
10 80,300 -551446 -726000 9 34,055 -233,867 -307,895 63174600
Residual Value 11,870,074 5,727,858 9 5,034,070 2,429,171 0 6142216
NPV -5,911,981 -4,144,874 -3,930,859 irr
214,015
Purchase without Financing
Purchase with Financing
Years discounted
(t)Purchase without
FinancePurchase with
Financing
###
Purchase vs lease Cash Flows After Tax ($)
1 Minus 3 2 minus 3 1 vs 20 -11400000 -3579000 -78210001 730,949 156383 5745662 740,300 154975 5853253 740,300 149820 5904804 740,300 144237 5960635 740,300 138191 6021096 806,300 197643 6086577 806,300 190551 6157498 806,300 182871 6234299 12,676,374 5902412 6773962
IRR Differetial 7% 9% 6%
Discounted Years
IRR Purchase se with Finance Lease
0.0% 1,183,423 (2,565,917) (6,204,000)1.0% 131,874 (2,825,732) (5,898,602)2.0% (821,393) (3,055,486) (5,614,696)3.0% (1,686,431) (3,258,558) (5,350,454)4.0% (2,472,178) (3,437,931) (5,104,230)5.0% (3,186,592) (3,596,242) (4,874,533)6.0% (3,836,767) (3,735,827) (4,660,013)7.0% (4,429,032) (3,858,751) (4,459,446)8.0% (4,969,041) (3,966,847) (4,271,722)9.0% (5,461,849) (4,061,741) (4,095,832)
10.0% (5,911,981) (4,144,874) (3,930,859)11.0% (6,323,493) (4,217,530) (3,775,967)12.0% (6,700,023) (4,280,849) (3,630,394)13.0% (7,044,836) (4,335,844) (3,493,444)14.0% (7,360,867) (4,383,420) (3,364,483)15.0% (7,650,757) (4,424,380) (3,242,928)16.0% (7,916,884) (4,459,443) (3,128,247)
0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 17%
-$10,000,000
-$8,000,000
-$6,000,000
-$4,000,000
-$2,000,000
$0
$2,000,000
Discount Rate Sensitivity
Purchase
Purchase with Finance
Lease
Discount Rate
NP
V
Option (1) IRR Firms opportunity Cost
a b c
Option 1: PV of Purchase without Finance
0 Initial Capital Investment + PV of Purchase without Finance
1 Relevant Benefits (Rental Savings)
9 Relevant Benefits (Rental Savings) + Residual Value
Years from Project Launch
PV of Purchase without Finance
Option 1 Option 2
NPV $ -5,911,981 $ -4,144,874
0.519 -0.8419
Purchase without Finance
Purchase with Finance
Option 3
Lease
$ -3,930,859
profitability index = npv of cash inflows /
iinitial invesment
Option 1 Purchase without Finance
Discount rate 10%
Discounted year 0 1 2 3 4 Capital Investment -11,400,000Relavent Savings 70,949 80,300 80,300 80,300Residual valueCash flows -11,400,000 70,949 80,300 80,300 80,300
Discount factor 1.000 0.909 0.826 0.751 0.683 Discounted cash flow -11,400,000 64,499 66,364 60,331 54,846Cum. discounted cash flow -11,400,000 -11,335,501 -11,269,137 -11,208,807 -11,153,961
NPV -5,911,981IRR 1.13%MCR (Max Capital at Risk) 11,400,000B/C (Benefit to Cost ratio) 0.481
Option 2 Purchase with Finance
Discount rate 10%
Discounted year 0 1 2 3 4 Income 0 -503,617 -505,025 -510,180 -515,763Capital -3579000 0 0 0 0Cash flow -3,579,000 -503,617 -505,025 -510,180 -515,763
Discount factor 1.0000 0.9091 0.8264 0.7513 0.6830Discounted cash flow -3,579,000 -457,834 -417,376 -383,306 -352,273Cum. discounted cash flow -3,579,000 -4,036,834 -4,454,210 -4,837,515 -5,189,789
NPV -4,144,874IRR -6.21%MCR (Max Capital at Risk) 6,340,178B/C (Benefit to Cost ratio) 0.346
Option 3 Lease
Discount rate 10%
Discounted year 0 1 2 3 4 Income 0 -660,000 -660,000 -660,000 -660,000Capital 0 0 0 0Cash flow 0 -660,000 -660,000 -660,000 -660,000
Discount factor 1 1 1 1 1Discounted cash flow 0 -600,000 -545,455 -495,868 -450,789Cum. discounted cash flow 0 -600,000 -1,145,455 -1,641,322 -2,092,111
NPV -3,930,859IRR Err:523MCR (Max Capital at Risk) 3,930,859B/C (Benefit to Cost ratio) 0.000
5 6 7 8 9 Total-11,400,000
80,300 80,300 80,300 80,300 80,300 713,349
11,870,07480,300 80,300 80,300 80,300 11,950,374 -11,007,851
0.621 0.564 0.513 0.467 0.424 49,860 45,327 41,207 37,461 5,068,125 -5,911,981
-11,104,101 -11,058,773 -11,017,567 -10,980,106 -5,911,981
5 6 7 8 9 Total
-521,809 -528,357 -535,449 -543,129 -551,446 -4,714,7750 0 0 5,727,858 2,148,858
-521,809 -528,357 -535,449 -543,129 5,176,412 -2,565,917
0.6209 0.5645 0.5132 0.4665 0.4241-324,002 -298,244 -274,770 -253,374 2,195,304 -5,513,791
-5,513,791 -5,812,035 -6,086,805 -6,340,178 -4,144,874
-503617-505025-510180-515763-521809-528357-535449-543129-551446
5 6 7 8 9 Total
-660,000 -726,000 -726,000 -726,000 -726,000 -6,204,0000 0 0 0 5,727,858
-660,000 -726,000 -726,000 -726,000 -726,000 -6,204,000
1 1 1 0 0-409,808 -409,808 -372,553 -338,684 -307,895 -3,930,859
-2,501,919 -2,911,727 -3,284,280 -3,622,964 -3,930,859