Assistance for net cash flow (NPV) computation:
The net cash-flow (NPV) calculate the internal rate of return (IRR) of an investment and a number of outflows (disbursements) and inflows (proceeds). In other words: What is the profitability of an investment with certain regular costs and proceeds?
Example: The construction of an office building costs 2,000,000; the renting incomes are 250,000 per year, the annual costs are 70,000. In the end the house has still value of 750,000. The investment should be paid off after 20 years. How high are the interest charges (profitability) of the investment?
This kind of the computation is particularly suitable for a comparison of the profitability of investments with different costs and return streams. The payments are discounted with an internal interest yield rate in the desired period of time. Besides, it is possible to compute the net cash flow with alternative interest rates.
Input of the data: A high payment (investment sum) very frequently stands at the beginning of an investment and then there are continuous costs and proceeds during a certain period. In these cases the number of periods (usually in years), the capital outlays, the periodic costs and the periodic yields are entered into the appropriate cells. The net cash flow table is filled out automatically when the computation is carried out.
The number of rates: Enter the duration of the investment (usually) in years.
Investment sum: Enter the initial costs (investment sum).
Periodic costs: Enter the value of the periodic costs.
Periodic proceeds: Enter the value of periodic proceeds.
Direct input of the payment streams: If there are payment streams of various hight present in the course of the investment period, these have to be enter directly in the net cash-flow table.
Alternative interest rate: If you would like to know what the net cash-flow of a given payment and yield row would look like with an alternative interest rate, enter the alternative interest rate and compute the net cash-flow table again. At the end of the running time a positive or a negative residual value is calculated.
Compute: Click on "Compute", in order to calculate the profitability of the investment. The internal yield interest rate and the net cash-flow table are going to be computed.
The table "Net Cash-Flow": The result of the computations is the table "Net Cash-Flow"
