Net Present Value

Net present value is used to calculate the present value of multiple future cash flows. NPV analysis takes all of the future cash
then compares them against the initial cost. NPV analysis can be used to analyze various business decisions. The higher the N
analysis can be used to evaluate a single decision or compare several choices. Theoretically, the company should choose any d

This example involves the decision to purchase a new machine to replace an old one. JonesCo needs to purchase a new machi
will provide the same function. Machine A cost $100,000 and would provide savings of $25,000 for the next five years. Machi
of $20,000 for the next 5 years. The company's discount rate is 10%.

Machine A Time
0 1 2 3 4 5
Cash flows -$100,000 $25,000 $25,000 $25,000 $25,000 $25,000

Machine B Time
0 1 2 3 4 5
Cash flows -$75,000 $20,000 $20,000 $20,000 $20,000 $20,000

Machine A costs more than machine B but also provides higher savings than machine B in the future. Both machines have tota
machine. NPV analysis can be used to find out which machine will benefit the company the most.

Machine A Machine B
NPV -$5,230.33 NPV $815.74
-5,230.33076478883

22727.2727
Value
sis takes all of the future cash flows and discounts them back to time 0
s decisions. The higher the NPV the more beneficial the decision. NPV
company should choose any decision that has a NPV greater than 0.

eeds to purchase a new machine and has a choice of two machines that
or the next five years. Machine B cost $75,000 and would provide savings

ure. Both machines have total savings of $25,000 over the cost of the
.

Ans: Investing on machine B will be more profitable because it'sNPV is higher

 r 20%
Time 0 1 2
Investment 1 Cash flow -10000 24000 -14000
Investment 2 Cash flow -6000 8000 -1000
NPV Present Value Inv 1 -10000 20000 -9722.222222222
277.778 Present Value Inv 2 -6000 6666.6666666667 -694.4444444444
-27.778 Consider the following two investments,
■ Investment 1 requires a cash outlow of $10,000 today and $14,000 two ye
now. One year from now, this investment will yield $24,000.
■ Investment 2 requires a cash outlow of $6,000 today and $1,000 two year
One year from now, this investment will yield $8,000.

Q Which is the better investment?

A To determine which investment is better, you need to calculate net present va

Ans: Investment 1 is a better investment because NPV for investment 1 is high

 NPV
Total Cash Flow Invesment 1 277.78
0 Invesment 2 -27.78
1000
277.7777777778
-27.7777777778

0,000 today and $14,000 two years from

yield $24,000.
,000 today and $1,000 two years from now.

need to calculate net present value.

use NPV for investment 1 is higher

An estimated cost for beginning a business is $70,000, and income of $12,000,
$15,000, $18,000, $21,000, and $26,000 in the five years that follow. internal rate of
return for this investment:

Initial Investment Yr1 Yr2 Yr3 Yr4 Yr5

-70000 12000 15000 18000 21000 26000 8.66%
Q A product’s price changes over time. I know the date the product was sold.
How can I write a formula to compute the product’s price?
Date sold Price
January–April 2005 $98
May–July 2005 $105
August–December 2005 $112

A Date 1/1/2005 5/1/2005 8/1/2005

Price 98 1.5 112

Date Price
1/4/2005 98 98 #N/A
5/10/2005 1.5
9/12/2005 112
5/1/2005 1.5
 Prevent the user from entering any amount greater than $75 or less than $0, in the Amount column for M

Travel Expense Reimbursement

Name:
Date:
Client:

Item Account Notes Amount

Air Travel $25.00
Hotel Travel $100.00
Meals Meals & Ent $20.00
Car Travel $79.00
Parking Travel $150.00

Total $374.00
0, in the Amount column for Meals
 Allow the user to enter a whole number between 100 and 999 in the Department Number cell
Set an Input Message as well: Title is "Alert" and message is "Please enter a valid department number
Set an Error Alert style Stop as well: Title is "Error" and message is "Please enter a valid dept number b

PTO Request
Name
Department 500
Date

Comments
partment Number cell
r a valid department number between 100 and 999"
e enter a valid dept number between 100 and 999"
 School Accept % Enroll % GMAT GPA Cost Minority pct Non-U.S. pct Female %
Stanford 8.8% 78.4% 718 3.58 $ 31,002 24.6% 30.9% 38.7%
Harvard 11.6% 87.3% 703 3.58 $ 30,050 18.6% 37.2% 34.2%
Penn 15.5% 70.2% 703 3.57 $ 31,218 19.0% 43.1% 29.3%
MIT 18.1% 69.9% 703 3.50 $ 31,200 19.0% 35.5% 26.5%
Northwestern 16.6% 61.8% 700 3.45 $ 30,255 17.5% 30.8% 27.5%
Duke 20.1% 52.8% 690 3.43 $ 30,323 20.6% 32.7% 34.8%
Chicago 28.4% 59.7% 695 3.33 $ 30,596 18.2% 33.2% 23.6%
Columbia 13.5% 68.7% 705 3.40 $ 31,912 19.3% 26.5% 36.5%
Dartmouth 18.8% 53.3% 690 3.40 $ 30,250 17.2% 29.9% 27.6%
Berkeley 14.5% 50.3% 688 3.43 $ 21,242 19.4% 30.2% 30.4%
Michigan 19.6% 58.5% 676 3.34 $ 30,686 20.5% 31.2% 27.6%
Virginia 16.6% 51.0% 681 3.40 $ 27,283 15.1% 30.1% 29.1%
NYU 22.3% 48.2% 689 3.40 $ 31,746 19.0% 30.2% 34.1%
Yale 20.0% 56.7% 686 3.50 $ 29,055 17.3% 38.9% 27.5%
UCLA 17.4% 48.5% 691 3.60 $ 22,490 21.6% 24.0% 28.6%
Cornell 25.8% 51.2% 669 3.32 $ 30,455 22.6% 25.6% 27.1%
North Carolina 23.8% 44.2% 674 3.30 $ 25,525 16.2% 30.4% 30.6%
Carnegie-Mellon 28.2% 60.1% 652 3.25 $ 28,452 21.3% 38.3% 26.8%
Texas 30.0% 52.4% 680 3.34 $ 21,200 12.3% 26.7% 22.7%
USC 29.0% 43.4% 670 3.30 $ 30,082 32.3% 23.8% 28.7%
Indiana 24.7% 49.8% 651 3.35 $ 20,696 14.3% 34.5% 20.7%
Emory 31.5% 46.7% 651 3.30 $ 28,012 10.7% 29.9% 23.4%
Rochester 32.7% 42.2% 637 3.33 $ 28,620 10.3% 54.2% 25.2%
Georgetown 20.8% 46.2% 662 3.35 $ 28,440 10.8% 38.7% 28.1%
Michigan State 22.3% 55.0% 641 3.36 $ 16,955 13.6% 37.9% 25.2%
Ohio State 29.0% 41.4% 645 3.38 $ 22,151 15.5% 29.2% 36.7%
Minnesota 34.4% 40.6% 645 3.33 $ 20,352 8.6% 29.1% 27.9%
 Salary
$ 124,740 Cost Salary
$ 121,979 MIT ₹ 31,200.00 $ 118,381.00
$ 121,200 Yale ₹ 29,055.00 $ 112,514.00
$ 118,381
$ 114,664 Disply Total Cost for
$ 115,444 HINT: Use SUM function and pass two vlookup function as two values
$ 115,331 each for Duke and Chicago cost from the given table Duke and
$ 117,989 Chicago using vlookup function
$ 121,692
$ 111,321 Total Cost
$ 117,498 $ 60,919.00
$ 112,706
$ 112,900
$ 112,514
$ 103,364
$ 116,588
$ 109,420
$ 111,211
$ 106,859
$ 95,213
$ 99,732
$ 104,417
$ 103,466
$ 99,528
$ 88,746
$ 99,598
$ 91,140
IF with nested AND
Data Description (Result)
The value in C3 is between 1 and 100.
54
Result: TRUE
If B4 value is greater than A4 and
50 85 less than A5 Display a message "The
value is out of range."
100 If B5 is greater than 50 and less than
99
100, display C5
 Formula
1
1

The value is out of range

hello
99
If B5 is greater than 50 and less than 100, display C5
The COUNTIF function

Fruit Data Number Data

apples 86
oranges 54
peaches 75
apples 32

Solution Problem
Create rangename for B5:B8 as "FruitData". Count
2 the number of cells holding "apples" in the "Fruit
Data" column above.
Create rangename for B5:B8 as
"NumberData".Count the number of cells with a
2
value > 55 in the "Number Data" column above.
Result: 2

Notes
Counts the number of cells within a range that meet the given criteria.

Syntax: COUNTIF(range,criteria)

Range is the range of cells from which you want to count cells.
Criteria is the criteria in the form of a number, expression, or
text that defines which cells will be counted. For example,
criteria can be expressed as 32, "32", ">32", "apples".
The SUMIF function

Property Value Commission

$100,000 $7,000
$200,000 $14,000
$300,000 $21,000
$400,000 $28,000

Solution Problem
63000
Sum commissions for property values over
$160,000.

Notes:
Syntax: SUMIF(range,criteria,sum_range)
Range is the range of cells you want evaluated.
Criteria is the criteria in the form of a number, expression, or text that defines which cells
will be added. For example, criteria can be expressed as 32, "32", ">32", "apples".
Sum_range are the actual cells to sum.
Remarks:
The cells in sum_range are summed only if their corresponding cells in range match the criteria.
If sum_range is omitted, the cells in range are summed.
The IF Function

Data
50

Solution

Within Budget

Notes on the IF Function

Returns one value if a condition you specify evaluates to TRUE
and another value if it evaluates to FALSE.
Use IF to conduct conditional tests on values and formulas.

Syntax: IF(logical_test,value_if_true,value_if_false)

Logical_test is any value or expression that can be evaluated to TRUE or FALSE.

For example, A10=100 is a logical expression; if the value in cell A10 is equal to 100,
the expression evaluates to TRUE. Otherwise, the expression evaluates to FALSE.
This argument can use any comparison calculation operator.

Value_if_true   is the value that is returned if logical_test is TRUE. For example,

if this argument is the text string "Within budget" and the logical_test argument
evaluates to TRUE, then the IF function displays the text "Within budget".
If logical_test is TRUE and value_if_true is blank, this argument returns 0 (zero).
To display the word TRUE, use the logical value TRUE for this argument.
Value_if_true can be another formula.

Value_if_false   is the value that is returned if logical_test is FALSE. For example,

if this argument is the text string "Over budget" and the logical_test argument
evaluates to FALSE, then the IF function displays the text "Over budget".
If logical_test is FALSE and value_if_false is omitted, (that is, after
value_if_true, there is no comma), then the logical value FALSE is returned.
If logical_test is FALSE and value_if_false is blank (that is, after value_if_true,
there is a comma followed by the closing parenthesis), then the value 0 (zero)
is returned. Value_if_false can be another formula.

Remarks
Up to seven IF functions can be nested as value_if_true and value_if_false
arguments to construct more elaborate tests.
When the value_if_true and value_if_false arguments are evaluated,
IF returns the value returned by those statements.
If any of the arguments to IF are arrays, every element of the array
is evaluated when the IF statement is carried out.
 Problem
If the value in Cell B5 is less than or equal to 100, then the
formula displays "Within budget". Otherwise, the function
displays "Over budget". Result: Within budget
If the number above is 100, then the range named
"BigRange" is summed. Otherwise, empty text ("") is returned.
Result: empty text

ecify evaluates to TRUE

alues and formulas.

e,value_if_false)

n that can be evaluated to TRUE or FALSE.

ssion; if the value in cell A10 is equal to 100,
rwise, the expression evaluates to FALSE.
calculation operator.

rned if logical_test is TRUE. For example,

in budget" and the logical_test argument
n displays the text "Within budget".
e is blank, this argument returns 0 (zero).
cal value TRUE for this argument.

urned if logical_test is FALSE. For example,

r budget" and the logical_test argument
n displays the text "Over budget".
lse is omitted, (that is, after
n the logical value FALSE is returned.
se is blank (that is, after value_if_true,
ng parenthesis), then the value 0 (zero)
her formula.

value_if_true and value_if_false

arguments are evaluated,

every element of the array

Expense Quarter 1 Quarter 2 Quarter 3 Quarter 4
Airfare $ 16,848.35 $ 17,267.30 $ 16,642.33 $ 16,996.83
Lodging $ 1,757.18 $ 1,645.11 $ 1,682.97 $ 1,745.59
Transportation $ 175.46 $ 169.16 $ 168.49 $ 170.43
Meals $ 339.96 $ 335.97 $ 342.62 $ 334.69
Entertainment $ 845.66 $ 856.43 $ 845.46 $ 834.35
Materials/Giveaways $ 1,745.01 $ 1,693.11 $ 1,747.34 $ 1,643.18
Total $ 21,711.61 $ 21,967.08 $ 21,429.21 $ 21,725.08

Total Attendance 4269 4460 4385 4112

$/per attendee $ 5.09 $ 4.93 $ 4.89 $ 5.28
1 Consolidate the expenses and attendance of all the four regions
in the expense and total attendance in table given
Expenses Quarter 1 Quarter 2 Quarter 3 Quarter 4
Airfare $ 4,086.99 $ 4,300.21 $ 4,060.89 $ 4,224.47
Lodging $ 429.96 $ 409.54 $ 405.17 $ 442.25
Transportation $ 43.76 $ 41.31 $ 40.34 $ 43.65
Meals $ 85.51 $ 82.48 $ 83.56 $ 80.08
Entertainment $ 200.87 $ 211.09 $ 215.70 $ 206.19
Materials/Giveaways $ 447.26 $ 435.96 $ 429.13 $ 415.03
Total

Attendance 1134 1120 1150 $ 1,112.00

$/per attendee $ - $ - $ - $ -
Expense Quarter 1 Quarter 2 Quarter 3 Quarter 4
Airfare $ 4,295.06 $ 4,372.89 $ 4,354.34 $ 4,422.14
Lodging $ 442.15 $ 401.29 $ 430.12 $ 448.06
Transportation $ 44.06 $ 43.54 $ 41.54 $ 44.19
Meals $ 85.45 $ 82.48 $ 88.36 $ 81.77
Entertainment $ 206.46 $ 205.31 $ 200.09 $ 205.66
Materials/Giveaways $ 436.61 $ 402.29 $ 446.13 $ 404.78
Total

Attendance 820 850 810 800

$/per attendee $ - $ - $ - $ -
Expense Quarter 1 Quarter 2 Quarter 3 Quarter 4
Airfare $ 4,024.19 $ 4,168.62 $ 4,096.31 $ 4,065.46
Lodging $ 441.32 $ 418.46 $ 411.14 $ 437.78
Transportation $ 43.55 $ 41.55 $ 41.67 $ 42.43
Meals $ 84.47 $ 89.84 $ 85.72 $ 88.42
Entertainment $ 222.16 $ 224.54 $ 219.84 $ 200.24
Materials/Giveaways $ 448.19 $ 419.56 $ 424.56 $ 408.62
Total

Attendance 973 990 950 900

$/per attendee $ - $ - $ - $ -
Expense Quarter 1 Quarter 2 Quarter 3 Quarter 4
Airfare $ 4,442.11 $ 4,425.58 $ 4,130.79 $ 4,284.76
Lodging $ 443.74 $ 415.82 $ 436.55 $ 417.50
Transportation $ 44.09 $ 42.76 $ 44.94 $ 40.16
Meals $ 84.54 $ 81.16 $ 84.98 $ 84.42
Entertainment $ 216.17 $ 215.49 $ 209.83 $ 222.27
Materials/Giveaways $ 412.95 $ 435.30 $ 447.52 $ 414.76
Total

Attendance 1342 1500 1475 1300

$/per attendee $ - $ - $ - $ -