nickmarsden76
New Member
- Joined
- Sep 25, 2006
- Messages
- 4
Hi - when using XIRR (or even IRR) for a series of cashflows, should the 'terminal period' cashflow be added to the last forecast period or should it be placed in the next cell. For example, if you have five years of 'forecast' cashflows, should the data be arranged as follows:
Yr 0 - (£50,000) [cash outflow]
Yr 1 - £10,000 [yr1 cashflow]
Yr 2 - £12,000
Yr 3 - £16,000
Yr 4 - £20,000
Yr 5 - £25,000 [yr5 cashflow]
Yr 6 - £100,000 [terminal value]
...or, should the last cashflow be added to the Yr 5 cashflow (so nothing in Yr 6, BUT £125,000 in Yr 5)?
I'm looking at this from a business valuation / corp finance perspective, so the terminal value is not actually cash that will be received, but rather a value placed on the business from yr 10 to infinity.
Yr 0 - (£50,000) [cash outflow]
Yr 1 - £10,000 [yr1 cashflow]
Yr 2 - £12,000
Yr 3 - £16,000
Yr 4 - £20,000
Yr 5 - £25,000 [yr5 cashflow]
Yr 6 - £100,000 [terminal value]
...or, should the last cashflow be added to the Yr 5 cashflow (so nothing in Yr 6, BUT £125,000 in Yr 5)?
I'm looking at this from a business valuation / corp finance perspective, so the terminal value is not actually cash that will be received, but rather a value placed on the business from yr 10 to infinity.