Sheet1
Assuming cash flow starts at end of period 0 (= beginning of Period 1) , i.e. start from Year 0
Discount rate 8%
Discount factor 1.00 0.93 0.86 0.79
Year 0 1 2 3 TOTAL
Benefits $0 $200,000 $200,000 $200,000 $600,000
Discounted benefit $0 $185,185 $171,468 $158,766 $515,419
Costs $140,000 $40,000 $40,000 $40,000 $260,000
Discounted costs $140,000 $37,037 $34,294 $31,753 $243,084
Cash flow ($140,000) $160,000 $160,000 $160,000 $340,000
Discounted cash flow ($140,000) $148,148 $137,174 $127,013 $272,336
Cumulative disc cash flow ($140,000) $8,148 $145,322 $272,336
NPV $272,336
ROI 112.0%
ROI = total discounted benefits – total discounted costs/discounted costs
ROI = 515,419 – 243,084/243,084 = 112%
Payback is during the 1st year (= starting to have positive cashflow)
Different ways of calculating NPV