Question
There are several Excel formulas that can be used for capital budgeting calculations. Here are a few:
1. Net Present Value (NPV): This formula calculates the present value of future cash flows. The formula is NPV(rate, value1, [value2], ...). 'Rate' is the discount rate, and 'value1, value2, ...' are the future cash flows.
2. Internal Rate of Return (IRR): This formula calculates the discount rate that makes the NPV of future cash flows equal to zero. The formula is IRR(values, [guess]). 'Values' is an array of cash flows, and 'guess' is your guess at what the IRR might be.
3. Payback Period: This isn't a built-in Excel formula, but it can be calculated by adding up the cash flows until the initial investment is recovered.
Remember to adjust these formulas according to your specific needs and the details of your investment.
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Customize the blue input fields with your investment details, and the template will automatically calculate the results in the tables and charts, providing a quick glance at each project's crucial metrics, such as cash flow, net present value, and breakeven point. Other charts calculate the return on investment (ROI), profitability index, and payback period based on the provided inputs.
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