PV FV & Return simple finance question

[njrocket]

Initial cash flow, C0 = -10,000 and cash flow in Year 1, C1 = +18,000.......What is the NPV and what is the Rate of Return, with a Opportunity Cost of capital of 20%???

Thanks!

 

[homehelp]

Initial cash flow, C0 = -10,000 and cash flow in Year 1, C1 = +18,000.......What is the NPV and what is the Rate of Return, with a Opportunity Cost of capital of 20%???

What you need to do is go to excel in A1 put in -10,000, A2 18000 and so on if if have more numbers and then .20
then =irr(your numbers ,.20) and I think that is how you should get your IRR. NPV is your benefits minus your cost then divide it by your interest rate.

Hope that helps...........

 

[Denis]

Rocket, enter the FULL original problem.
All we can see now is $10,000 earning $8000 over 1 year, or 80% return :shock:

 

[njrocket]

the full problem is this, we need to calculate the NPV and rate of return for the following investment.........The opportunity cost of capital is 20% for the investment. Initial cash flow, C0 = -10,000.........and the cash flow in year 1, C1 = +18,000.........that's all the information, thanks for the help guys, i really appreciate it.

 

[PennyLessFinancier]

the full problem is this, we need to calculate the NPV and rate of return for the following investment.........The opportunity cost of capital is 20% for the investment. Initial cash flow, C0 = -10,000.........and the cash flow in year 1, C1 = +18,000.........that's all the information, thanks for the help guys, i really appreciate it.

NPV is $5000

NPV = $18,000 ( 1/1+0.2) - $10,000
NPV = $18,000 ( 1/1.2) - $10,000
NPV = $18,000 ( 0.8334) - $10,000
NPV = $15,001.20 - $10,000
NPV = $5001.20

The difference between our calculation is the result of rounding off the PVIF(12% ,1 period) to four decimal places

In MS Excel

= -10000 + NPV(0.2, 18000)
=$5,000


IRR is 80%
The syntax for IRR in MS Excel is
=IRR(values,guess)
the guess is an optional value which when omitted defaults to 10% or 0.1

In MS Excel type -10000 in cell A1 and 18000 in cell A2
A1 -10000
A2 18000
In Cell A3 type
=IRR(A1:A2)
=0.7999999999
or
80%