Ideally, businesses would pursue any and all projects and opportunities that enhance shareholder value. However, because the amount of capital any business has available for new projects is limited, management uses capital budgeting techniques to determine which projects will yield the best return over an applicable period.
The template is constructed to evaluate potential major projects or investments that would require capital budgeting before they are approved or rejected, it helps CEO, CFO and entrepreneurs to assess a prospective project's cash flow to determine whether the potential returns that would be generated meet a sufficient target benchmark.
The template allows the user to calculate the net present value (NPV), internal rate of return (IRR) and payback period from simple cash flow stream with dynamic investment decision.
Inputs in the green cells:
Update the general info in the Front Page
Enter the investment amount in the green cell
Enter the discounted rate, usually the financials use the the weighted average cost of capital WACC
Enter the cash flow for 5 years.
The input in the green cells will dynamically flow into the following:
- Net present value
- Internal rate of return
- Payback period
- Dynamic investment decision base on net present value and internal rate of return
Conclusion and customization:
Highly versatile, very sophisticated financial template and friendly user