CALCULATING FUTURE VALUES WITH EXCEL

Initial Deposit
100
Interest Rate
6%
Number of years, n
2
Account balance after n years

Future Value of $10

112.36

$350.00

0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20

Future Value
$100.00
$106.00
$112.36
$119.10
$126.25
$133.82
$141.85
$150.36
$159.38
$168.95
$179.08
$189.83
$201.22
$213.29
$226.09
$239.66
$254.04
$269.28
$285.43
$302.56
$320.71

Future Value

$300.00

Year

$250.00
$200.00
$150.00
$100.00
$50.00
$0.00
1

2

3

4

5

ure Value of $100 at 6% Annual Interest

5

6

7

8

9

10 11 12 13 14 15 16 17 18 19 20 21

FUTURE VALUE OF A SINGLE DEPOSIT AT DIFFERENT
INTEREST RATES
HOW
$100 AT TIME 0 GROWS AT 0%, 6%, 12%
Initial Deposit
Interest Rate

100
0%

Year
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20

100
6%

100
12%

FV at 0% FV at 6% FV at 12%
100
100.00
100.00
100
106.00
112.00
100
112.36
125.44
100
119.10
140.49
100
126.25
157.35
100
133.82
176.23
100
141.85
197.38
100
150.36
221.07
100
159.38
247.60
100
168.95
277.31
100
179.08
310.58
100
189.83
347.85
100
201.22
389.60
100
213.29
436.35
100
226.09
488.71
100
239.66
547.36
100
254.04
613.04
100
269.28
686.60
100
285.43
769.00
100
302.56
861.28
100
320.71
964.63

1200

1000

800

600

400

200

0
1

2

3

4

FV at 0% FV at 6% FV at 12% 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 .

53 739.218.10 26.25 33.53 739.38 68.08 Total in account at end of year $ $ $ $ $ $ $ $ $ $ 106.397.13 1.00 100.397.00 $1.13 1218.36 337.00 100.36 19.00 100.85 50.08 1.00 218.71 597.75 1049.00 100.049.16 .38 889.FUTURE VALUE WITH ANNUAL DEPOSITS the beginning of year Interest Year 1 2 3 4 5 6 7 8 9 10 at 6% Account balance.71 597.08 Future Value using Excel's FV functions Deposit at beginning of year 100.00 100.46 463.75 1.00 100.36 337.36 59.00 100.00 100.46 463. beginning of year 0 106.00 100.95 79.16 Interest earned during year 6 12.00 218.82 41.38 889.

71 697.36 59.08 .71 697.00 206.10 26.46 563.00 100.85 50.46 563.00 100.38 68.318.53 839.00 $1.36 437.00 318.13 Future Value using Excel's FV functions Deposit at end of year 100.FUTURE VALUE WITH ANNUAL DEPOSITS at the end of year Interest Year 1 2 3 4 5 6 7 8 9 10 6% Account balance.00 100.00 100.95 Total in account at end of year $ $ $ $ $ $ $ $ $ $ 100.36 19.82 41.00 100.00 206. end of year 0 100.00 318.36 437.00 12.75 1149.53 839.00 100.13 1.318.25 33.00 100.75 1.38 989.149.38 989.08 Interest earned during year 0 6.00 100.00 100.

48 43.12 71.00 e n 60.38 83.00 V a l u e 20.68 46.00 P r 100.51 88.52 44.96 81.45 55.48 42.51 41.00 t 40.00 97.31 67.07 53.75 Present Value of $100 to b Discount Rat 120.96193 Present Value 100.44 60.75 64.20 49.13 73.50 65.45 51.99 48.74 52.63 79.18 69.00 0.22 75.82 47.00 100% 1100% .86 59.23 91.07 62.38 77.90 86.THE PRESENT VALUE OF $100 IN 3 YEARS in this example we vary the discount rate r Future Payment (X) Time of future payment (n) interest rate(.58 45.r) Present Value (X/(1+r)n) Discount rate 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 21% 22% 23% 24% 25% 26% 27% 28% 29% 30% 31% 32% 33% 34% 35% 36% 100 3 6% 83.06 94.56 40.64 39.87 56.34 57.00 e s 80.

80 32.63 .37% 38% 39% 40% 41% 42% 43% 44% 45% 46% 47% 48% 49% 50% 38.44 35.23 29.49 32.89 38.92 34.48 30.13 31.67 34.24 36.20 33.05 37.85 30.

e of $100 to be paid in 3 Years wen Discount Rate Varies 2100% 3100% Discount Rate 4100% 5100% .

CALCULATING PRESENT VALUES WITH EXCEL Annual Payment 100 r.33962264 100 88.24 .20936632 100 74.999644 100 83.24 $421.72581729 Present value of all payments Summing the present value Using Excel's PV function Using Excel's NPV function $421.24 $421.9619283 100 79. interest rate 6% Payment at end of year Year 1 2 3 4 5 Present value of payment 100 94.

69 .214.84 $373.CALCULATING NET PRESENT VALUE (NPV) WITH EXCEL r.00 $251. interest rate 6% Payment at end of year Year 1 2 3 4 5 100 200 300 400 500 Prsent value $94.214.34 $178.89 $316.69 $1.63 Present value of all payments Summing the present values Using Excel's NPV function $1.

77 205.41 72.24 136.00 N P V 0.03 -193.79 Summing the present values Using Excel's NPV function Discount Rate NPV 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 200. interest rate 5% Year Payment Present Value 0 1 2 3 4 5 -800 100 150 200 250 300 -800.67 -139.92 44.21 -119.CALCULATING NET PRESENT VALUE (NPV) WITH EXCEL r.06 NPV $44.83 -99.00 -100.00 95.00 150.28 250.00 0% 1% 2% .00 100.00 50.00 -150.79 17.96 -7.65 -32.00 165.79 $44.00 -250.00 -50.04 -176.00 -200.68 235.00 200.48 -77.86 133.05 172.11 -55.26 -158.36 102.

NPV and the Discount Rate 2% 3% 4% 5% 6% 7% 8% 9% Discount Rate 10% 11% 12% 13% 14% 15% 16% .

.

75 .USING NPV TO CHOOSE BETWEEN INVESTMENTS Discount Rate 15% Year Investment A 0 1 2 3 4 5 NPV Investment B -800 250 500 200 250 300 -800 600 200 100 500 300 219.06 373.

00 -250.11 -55.92 44.86 133.41 72.67 -139.03 -193.00 -100.00 -150.00 -50.04 -176. interest rate 6.00 N P V 0.6965% NPV IRR Discount Rate NPV 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 200.CALCULATING THE IRR WITH EXCEL r.00 -200.6965% Year Payment 0 1 2 3 4 5 -800 100 150 200 250 300 0.21 -119.48 -77.83 -99.26 -158.00 100.00 6.00 200.28 250.65 -32.00 150.00 50.00 165.96 -7.79 17.00 0% .36 102.

NPV and the Discount Rate 1% 2% 3% 4% 5% 6% 7% 8% 9% Discount Rate 10% 11% 12% 13% 14% 15% .

15% 16% .

X Deposit Total at End of or beginning year with withdraw of year interest l $20.00 NPV of all deposits and payments Deposit Total at End of or beginning year with withdraw of year interest l 8903.00 HELPING MARIO SAVE FOR A CAR USING AN EXCEL FUNCTION GOAL SEEK 8903.00% Deposit.1339 $18.000.00 5 6.615.10 0.HELPING MARIO SAVE FOR A CAR 8903.1339 8903.133 $9.615.38 $9.133 $18. X Interest rate In bank.00 $20.000.518. before deposit Year 0 1 2 0 8903.52 $20.615.000.00 -20000 $0.13 8.00) 0.38 $20.1339 $9. X Interest rate In bank.38 8903.00% $3.133 8903.00 $0.615.52 $20.347.00) ($0. before deposit Year 0 1 2 0 $9.518.133 8.00 -20000 ($0.38 8903.000.000.00 .00 NPV of all deposits and payments HELPING MARIO SAVE FOR A CAR using Excel's PV function Goal When to reach the goal? Interest rate Deposit.00% Deposit.

78 $6.665.665.000.52 51.00 -$20.227.546.78 $6.00 $4.23 $28.75 $71.78 $6.308.18) -$13.78 -$20.00 -$20.024.77 20.000.21 66.00 $4.21 $38.00 -$20.000.000.691.00 -$20.10 $39.026.000.93 35.985.00 $4.25 (11.000.686.063.78 $6.72 35.826.242.343.000.466.518.227.541.00 8.227.07 $21.28 $30.217.78 -$20.44 $60.85 28.50 Deposit or withdrawl at beginning of year $6.953.331.518.541.72 $31.466.51 25.05 36.00 $4.227.35 ($12.535.93 $55.227.000.000.45 $19.28 18.25 $8.238.87 45.950.000.45 23.000 $20.668.40 $25.52 55.50 .60 18.691.546.000.000. before deposit/withdrawl 0 $4.000.51 $45.00 Total 6.227. before deposit/withdrawl 0 $6.950.835.000.78 12.985.227.00 $13.000.78 $6.00 12.00 $4.00% $6.00 $8.341.569.00 -$20.000.238.74 $49.21 42.000.40 SAVING FOR COLLEGE USING TRIAL AND ERROR Interest rate Annual deposit Annual cost of deposit Birthday 10 11 12 13 14 15 16 17 18 19 20 8.60 $14.458.00 Total 4.726.000.28 $38.18) NPV of all payments Deposit or withdrawl at beginning of year $4.014.227.00 In bank on birthday.00 $4.00 In bank on birthday.000.320.320.227.40 29.024.00% $4.SAVING FOR COLLEGE Interest rate Annual deposit Annual cost of deposit Birthday 10 11 12 13 14 15 16 17 18 19 20 21 8.343.00 -$20.23 8.990.026.227.65) (32.78 $6.00 $4.78 $6.

227.569.541.29 18.01 SAVING FOR COLLEGE USING GOAL SEEK Interest rate Annual deposit Annual cost of deposit Birthday 10 11 12 13 14 15 16 17 18 19 20 21 8.227.458.00 -$20.000.535.29 $38.518.00 $13.54 51.28 $30.000.999.52 - $0.78 $6.063.78 Annual amount deposited .08 $21.88 45.75 $49.00 In bank on birthday.21 $19.665.686.227.227.45 $60. before deposit/withdrawl 0 $6.94 $55.22 66.014.227.990.665.85 28.227.02) -$0.78 -$20.98 NPV of all payments -$20.00 NPV of all payments Deposit or withdrawl at beginning of year $6.77 20.227.06 36.78 $6.78 -$20.78 $6.541.000.00% Annual deposit Linda's age today $6.00 Interest rate 8.76 $71.726.000.94 35.953.000.227.518.00% $6.00 SAVING FOR COLLEGE USING EXCEL FORMUALS ONLY Linda's age when plan started 10 Linda's age at last deposit 17 Number of deposits 8 Number of withdrawls 4 Annual cost of college $20.227.00 -$20.227.000.78 $6.308.217.00 (0.78 12.52 $20.00 -$20.00 Total 6.78 $6.78 $6.52 55.000.10 $39.78 $6.341.242.227.835.000.

490.962.81 $1.227.000 $15.423.000 $10.65 $3.96 $9.72 $3.61 $3.60 $20.081.700.768.304.68 $2.029.000 $0 1 2 3 .47 $2.47 $14.0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 $1.439.88 $11.61 $4.000 $5.404.78 $7.000 $20.92 $25.291.69 $5.572.979.73 $2.184.68 $6.735.

98 Total End of year with interest 75.60 $14.195.80 $137.292.23 $28.00 163.195.102.191.269.05 Deposit or withdrawl at $75.51 $45.750.396.396.74 166.000 $30.750.93 $162.00 $97.SAVING FOR COLLEGE Interest rate Annual deposit Annual cost of deposit End of year with interest $4.10 $39.35 ($12.00 -$30.93 $162.74 $196.80 $137.269.531.269.00 -$30.000.518.50 $19.00 In bank on birthday.00 -$30.35 $195.541.93 $55.990.00 81.102.665.026.00 $193.000.18) ($34.292.341.127.014. before 0 $81.024.44 $60.74 $196.892.45 $19.000.00% $75.668.892.18 $115.000.102.72 $31.21 $38.195.00 97.546.127.05 $81.999.000.396.892.93 162.466.691.985.308.40 $25.817.25 $8.750.00 $8.544.98 164.531.80 137.320.74 $49.458.05 $197.00 -$30.950.28 $38.00 NPV of all payments -$22.238.835.000.292.26 .24) Birthday 1 2 3 4 5 6 7 8 9 10 9.18 $115.18 115.75 $71.60 R End of year with interest $6.35 165.531.98 $194.00 $97.35 $195.00 $13.000.343.00 $193.127.98 $194.726.07 $21.000.28 $30.

08 $21.458.76 $71.518.665.94 $55.28 $30.($0.835.52 $20.000 .00 NLY Annual Deposit Required to Fun 4 Years of $20.29 $38.000.990.341.014.45 $60.308.02) End of year with interest $6.75 $49.10 $39.541.00 $0.726.00 $13.

Annual Deposit Required to Fun 4 Years of $20.000 When Linda is 18 4 5 6 7 8 9 10 Linda's age at start of plan 11 12 13 14 .

6 115396.8 125782.5 104402.9 81099.12 .89107.17 105868.5 97127.19 55698.

.

15 16 .

000.704.000.68 13.00 342.000.000.00 942.00 752.000.279.000.00 422.16 11.000.00 302.454.000.377.02 4.000.00 332.00 392.48 5.789.315.000.000.000.61 32.00 742.000.000.74 58.00 682.000.00 242.SAVING FOR RETIREMENT Joe's age today Joe's age at last deposit Number of deposits Number of withdrawls Annual withdrawal from age 65 Interest rate $ $ Annual deposit Joe's age today 20 64 45 20 100.000.123.00 762.000.000.00 452.07 3.000.000.79 40.000.000.00 912.00 822.58 16.00 542.00 502.00 732.00 232.00 612.000.00 972.73 3.496.00 642.00 602.000.750.000.000.00 842.00 662.675.86 45.834.189.000.000.00 862.090.85 5.00 582.000.000.000.000.000.000.000.00 892.736.47 6.983.000.540.000.216.000.91 12.000.247.978.00 772.00 672.000.697.00 792.18 36.00 382.00 572.000.298.00 272.000.00 872.000.00 852.000.727.23 2.00 782.00 222.430.00 292.000.00 882.84 992.000.000.959.00 252.00 462.00 372.000.15 19.03 14.00 352.000.000.32 7.03 7.000.00 832.00 652.000.00 402.000.00 312.000.00 492.227.00 322.96 4.666.62 10.000.00 952.39 4.000.000.23 Annual amount deposited 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 2.705.000.60 21.000.109.000.00 432.00 512.00% 2.00 482.00 982.00 412.53 17.90 9.86 26.00 902.000.000.000.00 552.000.00 802.443.000.00 712.00 722.00 282.000.000.00 692.00 522.00 962.000.239.000.545.96 3.00 442.000.000.000.00 362.85 8.540.79 51.688.00 472.00 8.159.00 932.82 23.000.57 2.00 632.000.51 29.00 562.000.000.000.00 262.00 .00 532.73 6.00 812.00 592.00 622.00 702.00 922.456.471.000.000.

623.00 142.000.84 472.00 42.44 92.000.000.305.00 132.00 82.000.00 2.00 20 21 22 23 24 .026.00 182.34 133.32 981.00 52.000.034.000.00 112.000.000.00 92.000.000.774.12 302.17 78.00 162.00 122.00 222.74 242.00 232.431.46 167.00 62.000.00 72.000.000.000.55 56 57 58 59 60 61 62 63 64 67.00 12.00 32.000.814.000.000.66 217.885.00 172.00 102.00 22.00 202.000.836.000.00 152.356.000.000.000.000.08 110.000.00 192.00 212.000.

Annual Deposit Required to Fund 20 Years of $100.000 When Joe is 65 .

24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 Joe's age at start of plan .

000 .$100.

49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 .

42 Return of principal $150.54 $16.00% $250.00 $250.27 $70.682.54 $16.85 $84.274.00% Years to pay off loan 10 Annual payment $16.50 $303.923.479.99 $7.693.000.186.169.00 $165.274.54 $16.55 $10.19 $8.274.54 $16.274.823.00 $250.00 $181.07 $14.00 $503.33 $5.245.81 $4.00 $250.901.55 $8.047.274.450.54 Part of Part of payment that payment that is interest is principal $10.86 $61.54 Year 1 2 3 4 5 6 7 8 9 10 Principal at beginning of year 100.LOAN PAYMENT Loan Principal 100.00 $85.087.00 $68.58 .50 $199.588.54 $16.274.000.39 $8.274.24 Payment at end of year $250.000.00 $250.000.50 $6.00 10.00 $250.472.54 $6.231.274.47 $79.04 Principal at end of year $16.351.99 $6.73 $12.21 $11.41 $9.10 $40.13 $7.824.24 $2.46 $86.00 $685.795.115.795.51 $1.50 $50.03 $14.274.54 $16.00 $93.54 $16.592.274.37 $28.00 Loan Interest 10.30 $13.65 $219.158.274.372.105.00 $850.274.35 $30.227.00 $9.725.000.00 Interest $100.54 $16.879.35 $7.31 $51.54 $16.04 HOW LONG TO PAY OFF THIS LOAN? Loan amount Interest rate Annual payment Year 1 2 3 4 5 6 $1.54 $16.00 Principal at beginning of year $1.62 $241.274.

.

.

000 500 0 1991 1992 .500 2.573 413 1998 2.3.000 4.000 Dividends MERCK & CO.500 3.000 1.000 2.040 2.798 3.434 705 139 1995 1.174 371 83 1994 1.064 863 52 1993 1.545 641 3. 1991-2000 Proceeds Purchase from of Year Dividends exercise Treasury of stock stock options 1991 893 184 48 1992 1.000 1.500 1.500 1.582 323 2000 2.000 500 2.729 2.590 3.540 1.571 264 1996 1.500 0 1991 1992 2.253 3.626 490 1999 2.493 442 1997 2.

Merck Dividends, 1991-2000
Merck Treasury Stock and Option Exercise

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

Year

1993

1994

1995

1996

Years

1997

1998

1999

2000

Exercise

2001

Purchase of Treasury stock
Proceeds from exercise of stock options

2001

Line versus XY Charts
x
0
6
8
15
22
97

y
13
22
31
-8
14
6
35
30
25
20
15
10
5
0
-5 0
-10

60 12

18 6 24

yx y 24 30 36 8 42 4815 54 60 22 66 72 7897 84 90 96 .

AVERAGE MONTHLY MAXIMUM AND MINIMUM TEMPERATURES--NEW YORK C Jan Feb Mar Apr May Jun Jul Aug Sep Avg max temp (F) Avg min temp (F) 38 40 50 61 72 80 85 84 76 25 27 35 44 54 63 68 67 60 NYC Temprature 90 80 70 60 50 40 30 20 10 0 Jan Feb Mar Apr May Jun Jul Months Aug Sep .

ES--NEW YORK CITY Oct Nov Dec 65 54 43 50 41 31 mprature Avg max temp (F) Avg min temp (F) Sep Oct Nov Dec .

00 132.09 174.25 152.GRAPHS TITLES THAT UPDATE AUTOMATICALLY Growth 15% Year 1 2 3 4 5 6 7 Cash Flow Graph When Cash flow 100 115.14 231.90 201.0% 2 .31 250 200 150 100 50 0 1 Cash Flow Graph When Growth = 15.

h Flow Graph When = 15.0% 3 4 Growth 5 6 7 .

33 FUTURE VALUE 1 2 3 4 5 6 7 8 9 10 $690.00 $1.250.000.049.81 $1.509.250.00 $2.00% Interest rate Year Future value in year 10 Gift 0 1 2 3 4 5 6 7 8 9 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 TOTAL Future value in year 10 EXERCISE 3 Interest rate 7.693.454.73 $2.00 $500.00 $1.00 1 EXERCISE 2 8.00 $2.00 $793.33 FUTURE VALUE $ Deposit Interest rate. FV YEAR 600. FV $2.604.12 $11.500.427.835.00 $0.00 $1.00 $250.00 15% 10 $2.24 $15.01 $1. n Future Value.EXERCISE 1 Future Value.427.50 $912.00 $156.00 $1.750.28 $13.87 2 .110.87 $156.589.84 $1.25 $19.387.500.454.596.41 $2.05 $18.89 $12.597.800.138.74 $14.00% $21.00 $10.00 $750. r Number of years.000.206.664.53 $1.990.30 $17.868.40 $1.

11 $33.47 $877.97 $769.95 $8.Year Future value in year 10 Gift 0 1 2 3 10000 10000 10000 10000 TOTAL Present Value of as of today $7.08 $674.79 $33.98 $8.71 .19 $2.913.872.628.71 $2.00% Interest rate Year Future value in year 10 Gift 1 2 3 4 1000 1000 1000 1000 TOTAL Present Value of as of today EXERCISE 5 Year 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Payment -1000 150 150 150 150 150 150 150 150 150 150 150 150 150 150 150 $592.345.913.872.11 EXERCISE 4 14.39 $9.162.734.

USING IRR EXCEL FUNCTION USING RATE EXCEL FUNCTION 12% 12% EXERCISE 6 Year Payment 0 1 2 3 4 5 6 7 8 9 10 -1000 100 200 300 400 500 600 700 800 900 1000 USING IRR EXCEL FUNCTION 32% EXERCISE 7 BOND FACE VALUE NUMBER OF PAYMENTS PAYMENTS INTEREST RATE PV Your age today Retirement age Number of deposits Planned age of demise Number of withdrawls Annual desired pension payout Annual payment Interest rate $ $ $ 1.238.33 SAVING FOR THE FUTURE 35 65 30 85 20 100.733 8% .00% 1.00 7.000 10.000.00 6 120.

733 Interest earned during year .733 Deposit or withdrawal beginning of year 10. beginning of year 10.Your age 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 Account balance.

FV 3 4 5 6 YEARS 7 8 9 10 .FUTURE VALUE.

.

.

Total in account end of year .

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