- #1
LittleJonJon
- 5
- 1
Consider the following income and expenditure of a project over past 23 years and the interest rate of 12% compounded annually.
(1) Plot the Cash Flow
(2) Using excel formulas, calculate the present worth of the project.
(3) Using excel formulas, calculate future worth of the project at the end of year 2023.
1. Present Worth (PW)
The present worth of each cash flow is calculated using the formula:
where:
CF is the cash flow for the year.
i = 0.12 (the annual interest rate).
n is the number of years since 2000
Example Calculations
For 2000
For 2001
For 2003
By summing the present worths of all cash flows:
2. Future Worth (FW)
The future worth of each cash flow is calculated using the formula:
where:
CFis the cash flow for the year.
i = 0.12 (the annual interest rate).
2023 Year is the number of years until 2023.
Example Calculations
For 2000
For 2001
For 2003
By summing the future worths of all cash flows:
Results
Present Worth (PW): -110.11
*Future Worth (FW): -1492.28
Is this the right method for solving this problem? Is there a simpler approach? Can it be solved using Excel functions? e.g.
Present worth =NPV(i%,second_cell:last_cell) + first_cell
Future worth = FV(i%, n, A, P) ?
(1) Plot the Cash Flow
(2) Using excel formulas, calculate the present worth of the project.
(3) Using excel formulas, calculate future worth of the project at the end of year 2023.
1. Present Worth (PW)
The present worth of each cash flow is calculated using the formula:
where:
CF is the cash flow for the year.
i = 0.12 (the annual interest rate).
n is the number of years since 2000
For 2000
For 2001
For 2003
By summing the present worths of all cash flows:
2. Future Worth (FW)
The future worth of each cash flow is calculated using the formula:
where:
CFis the cash flow for the year.
i = 0.12 (the annual interest rate).
2023 Year is the number of years until 2023.
Example Calculations
For 2000
For 2001
For 2003
By summing the future worths of all cash flows:
Results
Present Worth (PW): -110.11
*Future Worth (FW): -1492.28
Is this the right method for solving this problem? Is there a simpler approach? Can it be solved using Excel functions? e.g.
Present worth =NPV(i%,second_cell:last_cell) + first_cell
Future worth = FV(i%, n, A, P) ?