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NPV Analysis and Discount Rate Impact

This document contains an analysis of the net present value (NPV) of a project at different discount rates. It shows the cash flows of the project and calculates the NPV at a 20% discount rate to be $264.79. It then identifies the internal rate of return (IRR) as 31%. Finally, it displays how the NPV would vary from positive to negative as the discount rate changes from 10% to 50%.

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Pooja Gupta
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140 views3 pages

NPV Analysis and Discount Rate Impact

This document contains an analysis of the net present value (NPV) of a project at different discount rates. It shows the cash flows of the project and calculates the NPV at a 20% discount rate to be $264.79. It then identifies the internal rate of return (IRR) as 31%. Finally, it displays how the NPV would vary from positive to negative as the discount rate changes from 10% to 50%.

Uploaded by

Pooja Gupta
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd

t 0 1 2 3 4 5

Discount Rate 20% -1,000.00 500.00 300.00 300.00 300.00 800.00

Excel NPV 264.79 NPV(B11,D11:H11)+C11

First Principle Discount factor 0.833333 0.694444 0.578704 0.482253 0.401878


PV -1,000.00 416.67 208.33 173.61 144.68 321.50
1,264.79
NPV 264.79

At IRR NPV = 0
31%

At this discount rate, I should be indifferent to this investment


How NPv would vary with discount rate Vary 2 values and impact on the output

Output variable 264.79 -1,000.00 Vary 2nd variable


Varied 1 variable 10% 629.51487
12% 543.71772
14% 465.04722
16% 392.7584
18% 326.19744
20% 264.78909
22% 208.02598
24% 155.45952 Row input cell = what to vary first variable -> point to that varia
26% 106.69219 Column input cell = what to vary the second variable
28% 61.370969 Reference the original location which has been referenced in th
30% 19.181617
32% -20.15613
34% -56.89275 How NPV varies with discount rate
36% -91.25257 800
38% -123.4368
40% -153.6265 600
42% -181.9844
44% -208.6576 400
46% -233.7789
48% -257.4685 200
50% -279.8354
52% -300.9786 0
5% 10% 15% 20% 25% 30% 35% 40% 45% 50%
1200
1200 -200

-400
rst variable -> point to that variable
y the second variable
which has been referenced in the formula, since this would be varied and referenced there

ith discount rate

% 35% 40% 45% 50% 55%

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