Administration and Executive AssistantTier 535 minadvanced

NPV and the Period-Zero Trap

Value a project properly by keeping today's outlay separate from the cash flows NPV discounts.

What you will learn

• Explain that NPV() treats every cash flow it is given as landing one period in the future
• Add an initial outlay to the result of NPV() rather than passing it inside the function
• Compare several projects' NPV at the same discount rate to find the one that creates the most value

Excel skills

NPV · Investment Appraisal

The task

Six projects are on the table and we can only fund one this year. Work out the NPV of each at our 11% discount rate and tell me which one to fund. Each project's initial outlay happens now, this year - the cash flows after that happen at the end of each following year.

You work in a real spreadsheet in your browser, and your answer is checked against hidden traps the moment you submit.

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