functions NPV Value today of a set of future cash flow PV Present value of a series of cash flows NPV PVtime zero cash flow cost of the asset NPV NPV interest ID: 579968
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Slide1
Financial functionsSlide2
NPV
Value
today
of a set of future cash flow
PV=
Present
value
of a
series
of cash
flows
NPV= PV-time zero cash flow (
cost
of the
asset
)Slide3
NPV
NPV(
interest
,
range
)
Net
present
value
of a
sequence
of cash
flows
at
the «discount rate»
Assumption
: first cash
flows
after
one
period
Not
net (
function
misnamed
!)
Cash
flows
evenly
spacedSlide4
IRR
IRR(cash
flows
,
guess
)
Computes
the
internal
rate of
return
of a
sequence
of cash
flows
(IRR
makes
the NPV=0)
Guess
is
the
starting
point
for the
algorithm
Useful
if
more
than
one
IRR
is
present
Cash
flows
evenly
spaced
IRR
includes
all
the
arguments
(
including
the first
neagtive
one
)Slide5
IRR and loan
tables
Show the
division
of the
investment
cash
flows
between
:
Investment
income
=IRR*
principal
balance
at
the
beginning
of the
year
Return of
the
investment
principalSlide6
Multiple IRRs
To
find
the extra IRR use the «
guess
» extra
argument
The
guess
is
the
starting
point
for the
algorithm
that
excel
uses
to
fing
the IRR
Guess
has
to be
close
to the IRR
Graph
the NPV
see
points
in
which
the
function
crosses
the x-
axis
Recall
the
Theorems
!!Slide7
Payment
PMT(rate;
n.periods
;
pv
; [future
value
];
type
)
This
function
calculates
the
payment
necessary
to
pay
off a
loan
with
equal
payments
over a
fixed
number
of
periods
See
also
loan
TablesSlide8
Loan table
Flat
payment
schedule:
Take a
loan
for 10.000 Euro,
interest
rate =7% per
year
, to
pay
off the
loan
and the
interests
over 6
years
:
PMT
gives
the
annual
payment
Payment
is
split
into
Interest
and
repayment
of
principalSlide9
Present value
P
V(rate;
n.periods
;
payment
; [future
value
];
type
)
Calculates
the
present
value
of an
annuity
Payment
negative
if
pv
positiveSlide10
Future value
FV(rate;
n.periods
;
payment
; [
present
value
]; [
type
])
Computes
the future
value
of a
series
of
deposits
(
annuity
)
Type
(0=end of the
period
, 1=
at
the
beginning
) default=0Slide11
XNPV
XNPV(rate;
values
;
dates
)
Calculates
the net
present
value
for a
series
of cash
flows
when
dates
are
unevenly
spaced
All
cash flow
should
be
indicated
(
also
the first
one
)
Tools|Add-Ins
|Analysis
ToolpackSlide12
XIRR
XIRR(
values
(cash flow
payments
);
dates
(schedule of
dates
); [
guess
])
Calculates
the IRR for
cashflows
unevenly
spaced
Annual
IRR