Calculator: Financial Measure

Instructions: Enter your financial estimates into the yellow cells below (Initial Investment = B6, Cash
Cash Inflow Year 5 = G7, Required Rate of Return = B8). If you do not have five years of projected Cas
display in the green cells (Payback in years = I13, Net Present Value = I 14, Profitability= I15).

Year 1 Year 2 Year 3

Initial Investment $ 19,000
Cash Inflow $ 5,000 $ 10,000 $ 15,000
Required Rate of Return 25%

Financial Measure Description

equal to the initial investment divided by the annual cash flow. The sho
Payback in Years payback period, the quicker an organization can achieve financial bene

equal to the difference of the initial investment and the value of the cas
inflows over time considering a rate of return and the time value of mon
positive value is a sign the project will return financial benefits to the
Net Present Value organization.

equal to the ratio of present value of cash inflows to the initial investme
ratio of greater than 1 is a sign that the project will return financial ben
Profitability the organization.
inancial Measures Used for Project Selection

al Investment = B6, Cash Inflow Year 1 = C7, Cash Inflow Year 2 = D7, Cash Inflow Year 3 = E7, Cash Inflow Year
e years of projected Cash Inflow, some cells can be left blank. The financial measures will calculate automatical
rofitability= I15).

Year 4 Year 5

$ 20,000 $ -

Formula Used Calculation Result

nnual cash flow. The shorter the

n achieve financial benefits. =B6/35000 0.5

and the value of the cash

nd the time value of money. A
nancial benefits to the
=-B6+NPV(B8,C7:G7) $ 7,272

ws to the initial investment. A

will return financial benefits to
=NPV(B8,C7:G7)/B6 1.4
= D7, Cash Inflow Year 3 = E7, Cash Inflow Year 4 = F7,
he financial measures will calculate automatically and

culation Result

years is the payback period for this project

NPV for this project

Profitability Index for this project