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Thread: some help needed please

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    a task i have to do is slightly confusing (prob cos i have no accounting experience)

    i have to create a spreadsheet which will cope with up to 12 equal time periods over which cash flows may arise,and assess the potential of an investment project by..

    a)straight payback
    b)discounted payback
    c)internal rate of return

    im guessing a is using the pmt function so u input a total amount and repayment periods
    eg 12 ..and it tells u the repayment amount...does this sound right?

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    Heya Beastwood,

    a)straight payback
    b)discounted payback
    c)internal rate of return
    For (C) there is a -ta daa- IRR function.

    I'm not exactly sure what you're looking for on A&B, however based on the phrase "discounted payback" it sounds like you're looking for the Present Value (PV) of these cash flows. The NPV (Net-Present-Value) function might what you're looking for - assuming you've got an interest rate applied.

    The other possibility I see is that "payback" means something like "the number of periods to pay off the initial cost". Wanna give us some futher detail?

    Adam

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    hehe hi fella
    i have a brief description of each it seems to do with investments..the description for stright payback is...
    this is a simple method ,the sum of the cash flows is subtracted from the investment costs and if the result is positive the investment should be considered...

    only other info it gives me is to design a spreadsheet which wil cope with 12 equal time periods over which cash flows may arise and ***** the potential of an investment...

    im slightly confused by the terminology i think my initial idea was just payback of a loan with no interest.i think this is asking for something diferent

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    Hey again,

    I think I follow you (feel free to berate me if I'm somewhere in left field).

    Example:
    Investment Costs $10,000 (now at time 0)
    Investment returns $1,000 for 12 periods starting at the end of period 1.

    Straight payback = -10,000 + 12*(1000) = $2000 -am I in the right ballpark?

    Discounted Payback @10% = -10000 + =PV(10%,12,1000,0,0) = ($3,186)

    IRR = IRR(A2:A14,10%) = -6.4%

    where A2:A14 contains your -10000 cost and 12 pmts of 1000.

    Hope that helps,
    Adam

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