20mba1031 NPV
20mba1031 NPV
20mba1031 NPV
20MBA1031
WORKSHEET CREATION:
Open Excel and create worksheets for Company Profile, Beta and CAGR, WACC, Cash
Flow and NPV & IRR.
COMPANY PROFILE:
The details of the company, such as the name, core activity can be entered in the
Company Profile sheet.
COST OF EQUITY:
Go to WACC sheet and create a table for Cost of equity as shown below.
Input Beta, Market Rate of return (link Beta and CAGR values from previous sheet) and
Risk-free rate value (Government Security Yield or Bank fixed deposit rate), to calculate
cost of equity.
COST OF DEBT:
Input Total Debt and Interest Expense from the financial statements, to find the cost of
debt.
WACC:
Enter the formula for weightage of equity and weightage of debt and WACC.
Input market capitalization, long term debt cash equivalents value and tax rate (from
financial statements) to find WACC.
CASH FLOW:
Navigate to the Cash Flow sheet, and create tables as shown below
For tax amount, multiply EBIT*Tax rate (from WACC sheet) and drag the formula.
Subtract Tax from EBIT to get NOPAT and drag the formula.
For free cash flow, add NOPAT, D&A, change in working capital (positive) and subtract
capex and change in working capital (negative) and drag the formula.
Enter formula for Discount Period, Discount Factor and PV of Free Cash Flows and drag
it.
Input the Year, estimated revenue, EBITDA, EBIT, Capital Expenditures, change in
working capital and Depreciation & Amortization to find the Free Cash flow and PV of
free cash flows.
NPV & IRR:
Link the data of Year, Cash flow and PV of Cash Flow from Cash Flow sheet and drag
the formula.
Using SUM function, calculate the Net Present Values (NPV) of Cash Flows.
Use the IF function for investment decision, based on NPV & IRR values).
i.e., Accept if NPV is positive & Reject if NPV is negative
Accept if IRR >WACC & Reject if IRR < WACC.
• From the values of Cash Flow and PV of Cash Flow, the NPV, IRR, and accept/reject
decisions are computed.