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Project Evaluation Spreadsheet

Compare estimated cash flows from different projects...

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File Size: 28 KB
Date Added: Oct 2002 (updated Aug 2003)
Requirements: Microsoft Excel 97 and higher

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Description
Project evaluation is the process that is used to discount cash flows from different projects in order to compare the different projects and determine which project is more profitable.

What is discounted cash flow?  Discounted cash flow is simply the flip side of compound interest.  A future amount of money is worth less in today's terms so you 'discount it' to get the present value.

Projects have different durations and cash flows at different point in time.  Calculate the net present value for each project by adding the discounted cash flow for each project.  The net present value for each project can then be compared to determine which project is more profitable for the business.  If a net present value for a project is positive it means the project will add value to the business and should be considered.

Cash flows is discounted using the weighted average cost of capital as the discount rate.  The choice of discount rate is somewhat subjective but should be kept the same for all the projects being compared.

Cash flows is used because it better reflects the business earnings.

Pay back periods can also be used to compare projects by calculating how soon the initial investment in each project will be recouped.  Preference is given to projects with a shorter payback period.

This project evaluation spreadsheet compares cash flows from projects with different duration.  Enter the cash inflow and outflows for each project and the average cost of capital.  The spreadsheet will net calculate the total net cash flow for each year, the discounted cash flow for each year, the total net present value for each project and the internal rate on each project.  The spreadsheet will also calculate the cumulative cash flows and cumulative discounted cash flows for each year so that payback periods can be calculated and compared.  Worksheets are preformatted to be printed.

We have updated this spreadsheet to be able to calculate NPV and IRR on irregular cash flows.  Three optional worksheets are available for this purpose.  On these sheets you can enter irregular cash flows by date.  NPV is automatically calculated.  IRR is calculated by adjusting the discount factor until NPV equals zero.

We have also added 3 more pages that calculate IRR and NPV for cost saving projects where no new sales are generated.

Features
  • Total net cash flow for each year
  • Discount factor for each year
  • Discounted cash flow for each year
  • Cumulative cash flows
  • Net present value
  • Internal rate of return
  • Regular and Irregular cash flows
  • Cost saving projects
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Customer Reviews

Chris Lemmer, USA

"Thanks so much for the revised file.  My initial impressions are that it will meet my needs.  I will try to play around with it over the coming weeks and will let you know how I make out.  I also will tell others in my department about Verismall.com, your affordable licensing subscription service, and your fantastic customer service.  Thanks again for your help and best of luck with your venture!"

Chris Lemmer, USA

"Just wanted to send a quick note of thanks once again for the modification of the Project Evaluation template you put together for me a few months back.  We have used the template on one project so far, an opportunity to distribute our products for a lower cost after an initial investment.  The results provided by the template really helped to make a compelling case for the proposed change.  It's so easy to use, even non-financial managers can make compelling business cases for projects they champion.  Thanks again!"

Copyright 2014 Francois Andlau  -  all rights reserved