Introduction to Corporate Finance

Ross et al.: Fundamentals

of Corporate Finance, Sixth

Edition, Alternate Edition

IV. Capital Budgeting 9. Net Present Value and

Other Investment Criteria

© The McGraw−Hill^339

Companies, 2002

9.1 Net Present Value You have a project that has an initial cash outflow of

$20,000 and cash inflows of $6,000, $5,000, $4,000 and $3,000, respectively,
for the next four years. Go to http://www.datadynamica.com, and follow the “On-line
IRR NPV Calculator” link. Enter the cash flows. If the required return is 12 per-
cent, what is the IRR of the project? The NPV?

9.2 Internal Rate of Return Using the online calculator from the previous prob-
lem, find the IRR for a project with cash flows of
$500, $1,200, and
$400.
What is going on here?

Spreadsheet Templates9–3, 9–6, 9–7, 9–9, 9–12, 9–15, 9–18, 9–23

CHAPTER 9 Net Present Value and Other Investment Criteria 309

What’s On

the Web?

A B C

54321 D E F G H

876

11190

114132

Using a spreadsheet for time value of mo

If we invest $ 25 ,0 00 at 1 2 percent, how long uneyntil w calculations

e have $ 50 , (^000)? We need to solve
for the unknown of periods, so we u
RaFte (raPuturere Vsente)t Valuaelu (fv)e (pv) se the formal NPER (rate, pmt, pvfv)
ThPee foriods:
rmal entered in cell B 10 is = NPER: notic
has a negative sign on it. Also notice that rate is een thteat pred amt iss (^) de zceimroa al, nnd thot aat pv
percentage.
$$ 5200 ,0.1^5 ,0 02000
6 .1 (^16255)