Project Calculation Formulae
2021-03-08
·v1.0.1
·Prof. Dr. Ulrich Anders
2021-03-08
·v1.0.1
·Prof. Dr. Ulrich Anders
Here are the most relevant formulae for calculating project investment ratios with the used definitions:
Be careful if you use NPV in Excel. Normally, net present value (NPV) means that you are netting the present value (PV) of the return cash flows (CFs) from period 1 and later with the investment in period 0. However, the NPV-function in Excel only calculates the present value of the return cash flows from period 1 and later. You have to net this PV with the investment in period 0 yourself in order to get the NPV.
Be careful if you use the definition of MIRR from Excel. Excel-MIRR takes the bold assumption, that all cash flows that are negative are investments. But not all cash flows that are negative can be considered investments. So it is better to calculate MIRR yourself. You also should not net negative investments with positive return cash flows from the same period. This also distorts the Excel-MIRR.