3

Cash flows

Net present value

Varying interest rates

Internal rate of return

XNPV and XIRR

XNPV periodic example

Modified internal rate of return

Exercise

Summary

 

File: MFMaths3e_03.xls

The previous chapter dealt with single cash flows and this chapter shows how to model more complex cash flows and calculate the present value or the internal rate of return. Where you have a forecast of future cash flows, you need to know the value today to compare the potential gain against the possible risks. This is based on the key assumptions that $1 today is worth more than $1 at some future period and that each project should earn more than the inherent cost. The models in this chapter use a simple grid for calculating either the value or the yield ...

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