Capital Budgeting Modeling Documentation : NPV/DR

May 13th, 2015
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This model contains multiple spreadsheets to work on in order to find a optimal set of projects that maximize the net present value of the total investment in making capital budgeting decisions. In the 15 spreadsheets named after the project A to K, the user can edit the details (including life, beta and cash flow of each period) of the projects.

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Modeling DocumentationCapital Budgeting Modeling Documentation1. IntroductionThis model contains multiple spreadsheets to work on in order to find a optimal set of projects that maximize the net present value of the total investment in making capital budgeting decisions.In the 15 spreadsheets named after the project A to K, the user can edit the details (including life, beta and cash flow of each period) of the projects. The project templates also provide the user with some main accounting features of each project of which the calculations are explained in the Technical Details section. The NPV Profile sheet of the model allows the user to see the NPV curves of each project under a certain range of discount rates.In the Summary sheet, the user needs to enter (at most) 5 constraints, including capital constraints, beta constraints, whether to consider negative NPV projects, whether to ignore certain projects and selection of mutually exclusive projects. Before running the optimizer, the model also asks the user to enter the information needed to calculate the risk-appropriate discount rate.The result of the model (running the optimizer) is a selected optimal

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