Study guides for the MBA student

MBA study guide

NPV, IRR, MIRR, payback period are some of the tools that are available to an analyst to find an investor's ROI - return on investment. The IRR and MIRR are percentage interest rates, whereas the NPV is a money amount. In contrast payback period is the time required to recover the initial cost incurred in undertaking the project. Here me Abraham A. will present comparative analyis of all such methods to show pros and cons of each method.

NPV, IRR, MIRR, payback period

Download FREE Investment Analysis calculator

Please go ahead and download InvAppraisal calculator that offers 10 financial functions to analyze investments with NPV, IRR, MIRR, NFV, Equivalent annual annuity and cost, payback period, discounted payback period, benefit to cost ratio and profitability index. There are many unique features built into this calculator that allow for use of compounding frequencies of interest, and defining the length of the payment periods and to make use of discounting convention of your choice such as mid-year discounting and full-year discounting. Have a look at the screen shot of this robust, feature rich and easy to use calculator that is shown below. You may click on the investment analysis calculator screenshot to download and use this calculator on Windows 7 and 8 operating systems. No installation is required, just copy the file on your Windows desktop and run the program file by double clicking the program icon.

Investment analysis calculator
Qty.DescriptionPriceDownloadAction
1InvAppraisal Calculator$39Download Buy Now

There are several tools at the disposal of an analyst to help her find an investor's return on investment - ROI. Some of these measures include the IRR, MIRR, NPV, NFV, EAA, EAC, PP, DPP, Financial PI, and the B/C ratio. All these tools have there pros and cons such as the IRR happens to be the interest rate at which the investor breaks-even. The NPV - net present value is the sum of discounted cash flows that shows the money to made or lost from the investment as of present. The net future value is the sum of compounded cash flows that shows the money to be made or lost from the investment at the end of investment period. The EAA - equivalent annaul annuity is the uniform amount of money that is made or lost per period over the life of the investment. The EAC - equivalent annual cost if the uniform amount of cost that is paid per period over the life of the investment. The PP - payback period is the time period required to recover just the initial cost of the investment. The DPP - discounted payback period is the time period required to recover the initial cash outlay when the future incomes are discounted to reflect their present worth. The Financial PI - profitability index is the ratio of discounted profits over the discounted expenditures. The BCR - benefit to cost ratio is the ratio of discounted benefits over discounted costs. All these measures over the analyst insights into finding the worthiness of an investment. Here I present you a document as a Word file that begin with defining each of these financial measures and then to go ahead and show you formulas to find each of these metrics illustrated with example calculations of each. A concluding section will highlight the pros and cons of each of these methods thus enabling you to understand when to use the appropriate tool to help analyze investments.

Qty.DescriptionPriceAction
1NPV IRR MIRR PP Value Pack$19

The "Value Pack" gives you the IRR MIRR NPV Payback period comparison document along with tadXL v0.5 add-in for Excel 2007, 2010 and 2013. The tadXL add-in offers financial functions to analyze investments including the Excel functions for IRR MIRR NPV and payback period. Out of these four methods Excel offers functions for only IRR MIRR and NPV yet all such functions have severe limitations. First of all, the native Excel functions do not allow for compounding frequencies of interest, further in Excel there is no way to specify the length of the payment periods. And the functions in Excel default to the use of full-year discounting convention. In contrast the tadIRR, tadMIRR tadNPV and tadPP period function offer options to use almost any type of compounding frequency of interest, and payment periods of almost any length, it permits you to use any discounting convention of your choice such as mid-year discounting. For example, let us now find internal rate of return, modified IRR, net present value and payback period for a series of cash flows that are discounted at 10%. Such an investment cost $100 (in millions ) making quarterly returns in amounts of $60, $40, $35 and $15 using weekly compounding of interest. Now to find the IRR we use the Excel formula as =tadIRR({-100, 60, 40, 35, 15}, , 1/52, 1/4, 0.5 ) and the function will return an internal rate of return that is compounded weekly for quarterly payments that use mid-year discounting convention. Similarly we find the MIRR with the formula in Excel as =tadMIRR(10%, 10%, {-100, 60, 40, 35, 15}, 1/52, 1/4, 0.5 ) and the net present value with a formula such as =tadNPV(10%, {-100, 60, 40, 35, 15}, 1/52, 1/4, 0.5 ) and the payback period using the formula as =tadPP({-100, 60, 40, 35, 15}, 0.5 ). Thus the "Value Pack" offers you more value for the money and allows you to manually find the key financial measure and gives you access to financial functions in Excel.

Qty.DescriptionPriceAction
1NPV IRR MIRR PP Value Bundle$29

The "Value Bundle" gives away the IRR MIRR NPV and Payback period document, the tadXL add-in and the tadCalcs IRR MIRR NPV Payback period calculator for Windows 7 and 8. The Windows calculator finds the internal rate of return, the modified IRR, net present value and the payback period from series of cash flows that are entered in a text box where each amount is separated by a space. The Windows calculator along with document and tadXL add-in bundled in one "Value Bundle" offers you more value for your money and is a must have resource for anyone who is studying financial management.

Finance tutorials

Finance tutorials on a variety of topics ranging from finding ROI using IRR, NPV, Payback period, etc. TVM calculations i.e. present value & future value of loans and bank deposits. Valuation & yield on stocks and bonds i.e. cost of equity, & debt. Rates of return on investments i.e. ARR, GRR, holding period return & yield.

Excel 4 finance

Excel 4 finance to perform DCF analysis NPV, xNPV, IRR, xIRR, MIRR, xMIRR etc. Time value of money calculations i.e GRADIENT, INTEREST RATE, NPER, PMT, etc, yields and prices of bonds and stocks. Rates of return i.e. HPR, HPY, AHPR, and AHPY, etc.

TI BA II plus guide

TI BA II plus guide to analyze investments using capital budgeting methods i.e IRR, NPV, MIRR etc. TVM calculations i.e. RATE, NPER, PMT, PV, FV. Interest rate factors i.e. PVIFA, PVIF, FVIFA, FVIF, etc .

Finance tables

Finance tables to find interest factors for present value and future value of $1 and of annuities with start of period and end of period payments in amount of $1. Interest rates for growing and shrinking annuities are available as well.