Using Excel, build a spreadsheet model for the following net present value problem.
For this problem, you will have two sections to your spreadsheet. The first section lists the name of each input with the corresponding numerical amount. The second section calculates the net present value using the Excel NPV function.
You must use cell referencing and formulas in your spreadsheet. All of your numbers must have no more than 2 decimal places.
Problem
A project requires a current investment (outlay of cash at time zero) of $110,000 and yields future expected cash flows of $20,000 in year 1, $35,000 in year 2, $40,000 in year 3, $30,000 in year 4, $15,000 in year 5. If the company’s cost of capital is 9%, what is the net present value of this project?