# PROJECT MANAGEMENT

Jul 4th, 2016
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Questions and answers on project management.A unit in computer science

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QUESTION ONE (35 Marks)a) Explain how you can calculate NPV using excel and provide the formula used by excel.SolutionThe NPV of any investment or project can easily be calculated using Microsoft Excel,given that cash flows are evenly spaced over time.First, enter the anticipated discount rate into cell A1. Next, input all cash flowssequentially into adjacent cells, entering any outflow values as negative numbers. Forexample, a project with a single initial investment that is expected to generate returnsover the course of three years will have four entries in cells A2 through A5. Excelassumes all flows occur at the end of each period. Therefore, if the initial investmentoccurs at project inception rather than at the end of the first period, then this figure willneed to be added to the NPV function separately and not included in the function itself.If the initial investment occurs at the end of the first period, as the program assumes,enter the formula "=NPV(A1,A2,A3,A4,A5)" into cell A6 to render the NPV for thisproject.If the initial investment occurs at the beginning of the first period instead, enter theformula "=NPV(A1,A3,A4,A5)+A2" to account for that initial outlay.b) Supposing a real estate company offers you a piece of land that costs \$85,000 and youare certain that after one year the land will be worth \$91,000, a sure \$6,000 gain. On theother hand a bank guarantees you an interest rate of 10% if you deposit the money withthem for one year should y

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