Calculator: Financial Measures Used for Project S

Instructions: Enter your financial estimates into the yellow cells below (Initial Investment = B6, Cash Inflow Year 1 = C7, Cash In
Inflow Year 5 = G7, Required Rate of Return = B8). If you do not have five years of projected Cash Inflow, some cells can be left
the green cells (Payback in years = I13, Net Present Value = I 14, Profitability= I15).

Year 1 Year 2 Year 3 Year 4 Year 5

Initial Investment $100,000
Cash Inflow $35,000 $35,000 $35,000 $35,000 $35,000
Required Rate of Return 15%

Financial Measure Description

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

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

equal to the ratio of present value of cash inflows to the initial

investment. A ratio of greater than 1 is a sign that the project will return
Profitability financial benefits to the organization.
Measures Used for Project Selection

B6, Cash Inflow Year 1 = C7, Cash Inflow Year 2 = D7, Cash Inflow Year 3 = E7, Cash Inflow Year 4 = F7, Cash
Cash Inflow, some cells can be left blank. The financial measures will calculate automatically and display in

Formula Used Calculation Result

If cash inflow is consistent each year, formula

=B6/annual cash inflow. Otherwise, a more
complex formula is used to calculate each
year individually until the payback is
determined. 2.9 years is the payback period for this project

=-B6+NPV(B8,C7:G7) $17,325 NPV for this project

=NPV(B8,C7:G7)/B6 1.2 Profitability Index for this project