Use Excel to make a project selection decision based on payback period and modified IRR.
- [Instructor] Alternatives to IRR and NPV…include the very simple Payback Period test…and the Modified IRR…or Modified Internal Rate of Return test.…Each of these has distinct benefits.…Payback Period is a quick and dirty method…to evaluate a particular investment…without doing a lot of complex calculations or forecasts.…And Modified IRR helps to address…the limitations of the Simple IRR versus NPV.…
In this video, we'll talk about each of these tests…and how to use them in practice.…I'm in the 02_05_Begin Excel file.…Now, there's a couple of important factors…that we've overlooked…in considering this investment thus far.…Number one, when we're talking about IRR,…we referred to this as the rate of return…on this particular investment and that's true,…but a lot of investments including this one…pay cash every year.…
IRR implicitly assumes that we can reinvest that cash flow…easily and effectively.…So it says, "Well look in year one when we get this $24,000,…"we have some way to reinvest that."…That might be true and it might not be true.…
- Capital budgeting in Excel
- Using Excel in project selection
- Analyzing capital structure using Excel
- Estimating weighted average cost of capital (WACC)
- Applying Excel to operational budgeting
- Cash flow budgeting
- Stress test tools for budgets
Skill Level Intermediate
Excel 2016: Power Query (Get & Transform)with Oz du Soleil1h 49m Intermediate
Excel: Analyzing and Visualizing Cash Flowswith Curt Frye1h 16m Intermediate
1. Critical Tasks in Corporate Finance
2. Project Selection in Excel
3. WACC and Capital Structure in Excel
4. Operational Budgeting in Excel
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