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  • Practice Exercise - Capital Budgeting - NPV and IRR DONE

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    prathamesh rokde
    23 views17 pages
    1. The document contains calculations for simple and compound interest, net present value, and internal rate of return for different cash flow scenarios. 2. It compares the NPV and IRR for two potential investments/friends with cash flows of -1250, 200, 300, 200 and -2000, 200, 300, 200. 3. It notes some limitations of using the IRR, including that it ignores the size of the project and gives preference to earlier cash flows rather than total cash flows.

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    1. Practice Exercise - Capital Budgeting_NPV And IRR DONE

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    1. The document contains calculations for simple and compound interest, net present value, and internal rate of return for different cash flow scenarios. 2. It compares the NPV and IRR for two potential investments/friends with cash flows of -1250, 200, 300, 200 and -2000, 200, 300, 200. 3. It notes some limitations of using the IRR, including that it ignores the size of the project and gives preference to earlier cash flows rather than total cash flows.

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    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
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    23 views17 pages

    Practice Exercise - Capital Budgeting - NPV and IRR DONE

    Uploaded by

    prathamesh rokde
    1. The document contains calculations for simple and compound interest, net present value, and internal rate of return for different cash flow scenarios. 2. It compares the NPV and IRR for two potential investments/friends with cash flows of -1250, 200, 300, 200 and -2000, 200, 300, 200. 3. It notes some limitations of using the IRR, including that it ignores the size of the project and gives preference to earlier cash flows rather than total cash flows.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 17

    Principal 1000

    Rate 10%
    Time 2
    Future Value $1,210.00

    Loan amt 2500000


    Rate 9.25%
    Time 20 yrs

    EMI ($278,762) ($22,897)


    NPV
    IRR
    0 1 2 3
    10.00% -5000 3000 3000 3000
    -5000 2727 2479 2254

    -400,150, 250, 300

    NPV(A5,D5:F5)+C5

    IRR
    RATE

    IRR
    RATE
    IRR
    RATE

    0 1 2 3
    TODAY
    -1250 200 300 200
    20% 317.77 NPV
    27% IRR WHETHER IRR IS GREATER T
    OF WHETHER IRR IS LESSS T

    0 1 2 3
    TODAY
    -2000 200 300 200
    20% -432.23 NPV
    13% IRR WHETHER IRR IS GREATER T
    OF WHETHER IRR IS LESSS T

    B 0 1 2 3
    TODAY
    -1250 200 300 200
    27% 0 NPV
    27.29% IRR WHETHER IRR IS GREATER T
    OF WHETHER IRR IS LESSS T

    C 0 1 2 3
    TODAY
    -1100 200 300 200
    27% 150 NPV
    31.72% IRR WHETHER IRR IS GREATER T
    OF WHETHER IRR IS LESSS T

    C 0 1 2 3
    TODAY
    -100000 0 0 0
    6% -17,802 NPV
    1.92% IRR WHETHER IRR IS GREATER T

    C 0 1 2 3
    TODAY
    -1100 200 300 200
    27% 150 NPV
    31.72% IRR THERE ARE LIMIATIO

    3 CIRCUMSTANCES WHERE
    0 1 2 3
    TODAY
    A -1100 200 300 200
    B -1100 500 200 200

    0 1 2 3
    TODAY
    A -11000 2000 3000 2000
    B -1100 500 200 200

    0 1 2 3
    TODAY
    A -11000 2000 -3000 2000
    B 1100 -500 200 200
    - + + +
    + - - -
    - + - +
    irr npv ₹ -7,460.56
    36% 2460.56 ₹ 2,460.56
    24% 1221.80

    -400,150, 250, 300

    0 1 2 3
    TODAY
    -1000 0 0 0
    PV
    15%
    15%

    0 1 2 3
    TODAY
    -1000 200 200 200
    PV
    31%
    31%

    0 1 2 3
    TODAY
    -1000 200 300 200
    PV
    35%
    31% x

    4 5

    400 2200

    HER IRR IS GREATER THAN EXPECATIONS


    ETHER IRR IS LESSS THAN EXPECTATIONS

    4 5

    400 2200

    HER IRR IS GREATER THAN EXPECATIONS


    ETHER IRR IS LESSS THAN EXPECTATIONS

    4 5
    400 2200

    HER IRR IS GREATER THAN EXPECATIONS


    ETHER IRR IS LESSS THAN EXPECTATIONS

    4 5

    400 2200

    HER IRR IS GREATER THAN EXPECATIONS


    ETHER IRR IS LESSS THAN EXPECTATIONS

    4 5

    0 110000

    HER IRR IS GREATER THAN EXPECATIONS

    4 5

    400 2200

    THERE ARE LIMIATIONS OF USING IRR???

    UMSTANCES WHERE IRR CAN NOT BE USED


    4 5 npv irr
    20%
    400 2200 467.77 32%
    0 2200 455.43 33%

    4 5 npv irr
    20%
    4000 22000 4,677.73 32%
    0 2200 455.43 33%

    4 5 npv irr
    20%
    -4000 22000 -3,346.97 12%
    -200 2200 1,725.64 Err:523
    + +
    - -
    + -
    ₹ 2,236.87

    4 5 0 1 2 3
    TODAY
    0 2000 0 0 0
    FV ????
    PV ₹ -803.76
    NPV E ₹ 803.76

    4 5 0 1 2 3
    TODAY
    200 2200 200 200 200
    FV ????
    PV ₹ -1,401.88
    NPV E ₹ 1,401.88

    4 5 0 1 2 3
    TODAY
    400 2200 200 300 200
    FV ????
    PV ₹ -1,401.88
    NPV E ₹ 1,567.77

    0 1 2 3
    TODAY
    200 300 200
    ????

    NPV E ₹ 1,567.77 FRIEND A


    ₹ 317.77 FRIEND B
    NET PRESENT VALUE ( NPV)

    0 1 2 3
    TODAY
    FRIEND -1250 200 300 200
    ????

    NPV E ₹ 1,567.77 FRIEND A


    NPV CO ₹ 317.77 FRIEND B
    NET PRESENT VALUE ( NPV)

    0 1 2 3
    TODAY
    A -2000 200 300 200
    ????
    NPV E ₹ 1,567.77 INVESTMENT
    NPV CO ₹ -432.23 INVEST 2
    NET PRESENT VALUE ( NPV)
    IT GIVES PREFERENCE TO CASH FLOWS COMING EARLIER
    RATHER THAN TOTAL CASH FLOWS OF THE PROJECT

    IRR IGNORES THE SIZE OF THE PROJECT

    4 irrs
    4 5

    0 2000
    20%

    4 5

    200 2200
    20%

    4 5

    400 2200
    20%

    4 5

    400 2200
    20%

    FRIEND A -2000
    FRIEND B -1250

    4 5

    400 2200
    20%

    FRIEND A -2000
    FRIEND B -1250

    4 5

    400 2200
    20%
    INVESTMENT -2000
    INVEST 2 -1250
    G EARLIER

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