Module VIII
Capital Budgeting Spreadsheet Example
Name:
Date:
Project 1 Project 2 Project 3
Initial Investment $ 125,000 $ 200,000 $ 160,000
Cost of Capital 8% 10% 12%
Target Payback Period 4 years 4 years 4 years
Cash Flow
Project 1 Cum. CF Discounted CF Cum. CF Project 2 Cum. CF Discounted CF Cum. CF Project 3 Cum. CF Discounted CF Cum. CF
Initial Investment $ (125,000) $ (125,000) $ (125,000) $ (200,000) $ (200,000) $ (200,000) $ (200,000) $ (160,000) $ (160,000) $ (160,000) $ (160,000)
Year 1 $ 30,000 $ (95,000) $ 27,778 $ (97,222) $ 45,000 $ (155,000) $ 40,909 $ (159,091) $ 35,000 $ (125,000) $ 31,250 $ (128,750)
Year 2 $ 30,000 $ (65,000) $ 25,720 $ (71,502) $ 45,000 $ (110,000) $ 37,190 $ (121,901) $ 40,000 $ (85,000) $ 31,888 $ (96,862)
Year 3 $ 30,000 $ (35,000) $ 23,815 $ (47,687) $ 60,000 $ (50,000) $ 45,079 $ (76,822) $ 45,000 $ (40,000) $ 32,030 $ (64,832)
Year 4 $ 30,000 $ (5,000) $ 22,051 $ (25,636) $ 60,000 $ 10,000 $ 40,981 $ (35,841) $ 50,000 $ 10,000 $ 31,776 $ (33,056)
Year 5 $ 40,000 $ 35,000 $ 27,223 $ 1,587 $ 60,000 $ 70,000 $ 37,255 $ 1,414 $ 60,000 $ 70,000 $ 34,046 $ 989
Project 1 Project 2 Project 3 Which project(s) should be accepted?
Payback Period 4.13 4.94 Reject Project 1
Discounted Payback 4.94 Reject Project 1
NPV $1,587.13 Accept project 1
IRR 8.46% Accept project 1