Dear students,

Take the following exercises, useful for learning the principle of Time Value of Money.
 
1. Determine the net present value of a project whose projected cash flows are shown in the table below for an
expected return of 4% and an expected return of 6% (the discount factor/coefficient being therefore 0.04 and,
respectively, 0.06).
 
Cash flow from Cumulated
exploitation Residual Net cash
Year Investment net cash
value flow
Payments Receipts flow
1 1000000 - - - -1000000 -1000000
2 200000 500000 600000 - -100000 -1100000
3 - 1000000 1300000 - 300000 -800000
4 - 1100000 1400000 - 300000 -500000
5 - 900000 1200000 - 300000 -200000
6 - 800000 1000000 200000 400000 200000
 
First, perform the calculations according to the formula explained in the course using a regular computer, then verify
your results using the NPV function in Microsoft Excel.
 
2. With the data introduced in Excel, determine the Internal Return Rate using the IRR function of the program.
 
3. Determine the value of an enterprise that promises a constant annual profit of RON 100,000, given that the
average interest rate on the medium and long term is 5%