Task 1 of 3
In B10, calculate the project's NPV.
Lesson theory
Money today is worth more than money tomorrow. NPV (net present value) converts future cash inflows into today's money at a discount rate and subtracts the investment. An NPV above 0 means the project beats simply earning that rate elsewhere.
=NPV(B1,B4:B8)+B3 — the flows from year 1 on are discounted; the year-0 investment (B3) is added as is.IRR (internal rate of return) is the rate at which NPV = 0. If the IRR is higher than your required rate, the project is attractive.
The 8% discount rate is a practice number.
Practice is part of Pro
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