Discount rate

NPV
IRR

8%
71.01
10.56%

Year
0
1
2
3
4
5
6
7
8
9
10

#NAME?
#NAME?

Cash flow
-600
100
100
100
100
100
100
100
100
100
100

Decision: The NPV > 0 and hence you should purchase the asset.
Note that the IRR > discount rate, which leads to the same decision.

Cost
Payment
Interest

10,000
$2,983.16 #NAME?
15%
Division of payment between:

Year
1
2
3
4
5
6

Principal
at beginning
of year
10,000.00
8,516.84
6,811.22
4,849.74
2,594.05
0.00

Payment
at end of
year
2,983.16
2,983.16
2,983.16
2,983.16
2,983.16

Interest

Principal

1,500.00
1,277.53
1,021.68
727.46
389.11

#NAME?

1,483.16 #NAME?
1,705.63
1,961.47
2,255.69
2,594.05

#NAME?

#NAME?

A
1 Discount rate
2 Initial payment
3 NPV
4
5
Year
6
0
7
1
8
2
9
3
10
4
11
5
12
6
13
7
14
8
15
9
16
10
17
11
18
19
20
21

B
15%
129.2852
-226.52
Cash flow
-1000.00
100.00
110.00
121.00
133.10
146.41
161.05
177.16
194.87
214.36
235.79
259.37

#NAME?

#NAME?
#NAME?
#NAME?

Use Solver (see screen shot below) to find the answ

H
I
1
2
screen shot below)
3
to find the answer.
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22

A
Discount rate
NPV
Year
0
1
2
3
4
5
IRR1
IRR2

20%
76.71
Cash flow
-500
600
300
300
200
-1,000
6.34%
60.20%

Since the NPV > 0 for interest

rates between 6.34% and 60.20%,
you would invest in the project
if the discount rate is 20%.

#NAME?
#NAME?

Data table
76.71 #NAME?
0% -99.3347
4% -29.4699
8% 17.72083
12% 48.38769
16% 66.97176
20% 76.70671
24% 79.96436
100
28% 78.49546
32% 73.59927
50
36% 66.24427
40% 57.15483
0
44%
46.874
-50
48% 35.80937
52% 24.26678
-100
56% 12.47534
60% 0.606037
-150
64% -11.2143
68% -22.8925
72%
-34.361

H
1
2
3
4
5
6
7
8
9
10
100
11
1250
13
14 0
15 0%
-50
16
17
-100
18
19
-150
20
21
22

20%

40%

60%

80%

A
1 IRR?

B
10.00%

2
Year
3
4
5
6
7
8
9
10
11
12 IRR

0
1
2
3
4
5

Cash
flow
-800
300
200
150
122
133

5.07% #NAME?

Division of payment
LOAN TABLE
between:
Principal
Payment
Year
at beginning at end of Interest Principal
of year
year
1
800.00
300.00
80.00
220.00
2
580.00
200.00
58.00
142.00
3
438.00
150.00
43.80
106.20
4
331.80
122.00
33.18
88.82
5
242.98
133.00
24.30
108.70
6
134.28
<-- Should be zero for IRR

A
1 IRR?

B
3.00%

2
Year
3
4
5
6
7
8
9
10
11
12 IRR
13

0
1
2
3
4
5

Cash
flow
-800
300
200
150
122
133

5.07% #NAME?

Division of payment
LOAN TABLE
between:
Principal
Payment
Year
at beginning at end of Interest Principal
of year
year
1
800.00
300.00
24.00
276.00
2
524.00
200.00
15.72
184.28
3
339.72
150.00
10.19
139.81
4
199.91
122.00
6.00
116.00
5
83.91
133.00
2.52
130.48
6
-46.57
<-- Should be zero for IRR

J
1
2

3
4
5
6
7
8
9
10
11
12
13

Loan principal
Term (years)
Interest
Annual payment

100,000
5
13%
$28,431.45

#NAME?

Loan principal
Interest rate
annual
monthly
Loan term (months)
Monthly payment

15,000
15%
1.25%
48
$417.46

#NAME?

#NAME?
Split of payment
between:

Month
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39

Principal at
beginning of
Payment Interest Principal
month
15,000.00
417.46
187.50
229.96
14,770.04
417.46
184.63
232.84
14,537.20
417.46
181.72
235.75
14,301.46
417.46
178.77
238.69
14,062.76
417.46
175.78
241.68
13,821.09
417.46
172.76
244.70
13,576.39
417.46
169.70
247.76
13,328.63
417.46
166.61
250.85
13,077.78
417.46
163.47
253.99
12,823.79
417.46
160.30
257.16
12,566.63
417.46
157.08
260.38
12,306.25
417.46
153.83
263.63
12,042.62
417.46
150.53
266.93
11,775.69
417.46
147.20
270.27
11,505.42
417.46
143.82
273.64
11,231.78
417.46
140.40
277.06
10,954.71
417.46
136.93
280.53
10,674.19
417.46
133.43
284.03
10,390.15
417.46
129.88
287.58
10,102.57
417.46
126.28
291.18
9,811.39
417.46
122.64
294.82
9,516.57
417.46
118.96
298.50
9,218.07
417.46
115.23
302.24
8,915.83
417.46
111.45
306.01
8,609.82
417.46
107.62
309.84
8,299.98
417.46
103.75
313.71
7,986.27
417.46
99.83
317.63
7,668.64
417.46
95.86
321.60
7,347.03
417.46
91.84
325.62
7,021.41
417.46
87.77
329.69
6,691.72
417.46
83.65
333.81
6,357.90
417.46
79.47
337.99
6,019.91
417.46
75.25
342.21
5,677.70
417.46
70.97
346.49
5,331.21
417.46
66.64
350.82
4,980.39
417.46
62.25
355.21
4,625.18
417.46
57.81
359.65
4,265.54
417.46
53.32
364.14
3,901.39
417.46
48.77
368.69

40
41
42
43
44
45
46
47
48
49

3,532.70
3,159.40
2,781.43
2,398.74
2,011.26
1,618.94
1,221.71
819.52
412.31
0.00

417.46
417.46
417.46
417.46
417.46
417.46
417.46
417.46
417.46

44.16
39.49
34.77
29.98
25.14
20.24
15.27
10.24
5.15

373.30
377.97
382.69
387.48
392.32
397.22
402.19
407.22
412.31

Part c of question
PV of
remaining
payments
$15,000.00
$14,770.04
$14,537.20
$14,301.46
$14,062.76
$13,821.09
$13,576.39
$13,328.63
$13,077.78
$12,823.79

#NAME?
#NAME?
#NAME?

Same
answer
using PV
$15,000.00
$14,770.04
$14,537.20
$14,301.46
$14,062.76
$13,821.09
$13,576.39
$13,328.63
$13,077.78
$12,823.79

#NAME?
#NAME?
#NAME?

A
1 Cost of car, cash

B
30,000

Month
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33

Deferred payment plan

Cash payment
Monthly payment
Number of months
Bank car loan rate (annual)
Bank car loan rate (monthly)
9.a. Present value of deferred payment plan
Dealer's monthly IRR
Annualized (in this case, multiplied by 12)

5,000
1,050
30
15%
1.25%
31,133.35 #NAME?
1.56% #NAME?
18.73% #NAME?

0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30

Cash payment
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33

30,000
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

Payment
under
Difference
deferred
payment plan
5,000
1,050
1,050
1,050
1,050
1,050
1,050
1,050
1,050
1,050
1,050
1,050
1,050
1,050
1,050
1,050
1,050
1,050
1,050
1,050
1,050
1,050
1,050
1,050
1,050
1,050
1,050
1,050
1,050
1,050
1,050

25,000
-1,050
-1,050
-1,050
-1,050
-1,050
-1,050
-1,050
-1,050
-1,050
-1,050
-1,050
-1,050
-1,050
-1,050
-1,050
-1,050
-1,050
-1,050
-1,050
-1,050
-1,050
-1,050
-1,050
-1,050
-1,050
-1,050
-1,050
-1,050
-1,050
-1,050

#NAME?
#NAME?