From the course: Financial Modeling Foundations

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NPV decisions in financial models

NPV decisions in financial models

From the course: Financial Modeling Foundations

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NPV decisions in financial models

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- [Instructor] One of the best features of Excel is the ability to go through and build more complex models that make decision making very easy. Let's take a look at an example. I'm in the 06_06_begin file. So what we've got here is our three statement model, and you'll see that I've added in two different toggles. One for CAGR, right? Compounded annual growth rate under gray sky, base case, and blue sky scenario, and then our forecast method. And we've got a toggle here for top down, bottom up or CAGR. Now down below, we've then got two key output boxes, one for IRR and one for NPV or net present value. These are our two key decision criteria. We wanna go ahead with a project whenever IRR is greater than our hurdle rate, our WAC, our discount rate, whatever term we wanna use, or when NPV net present value is greater than zero, you know, and if the two conflict, 90% of the time they don't. But if the two conflict, we follow…

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