Module 4 of 8
Time value and investment decisions
Compounding and discounting, net present value, internal rate of return, and payback with its traps, worked through two equipment decisions at Northside Coffee and Hartley Plumbing.
Modules 1 to 3 describe what a business did and what its activities cost. This module is about spending money now for cash that arrives later: a second espresso machine, a van, a new service line. Every such decision compares dollars on different dates, so the first lesson builds the arithmetic for moving money through time and the next three apply it. The rates, costs and cash flows are case assumptions chosen to be checked by hand.
- 4.1Compounding and discountingFuture value, present value, annuities and effective annual rates, then a lease against a cash price.35 min
- 4.2Net present valueWhich cash flows to include, how to discount them, and why a positive NPV is the test for adding value.40 min
- 4.3Internal rate of returnIRR as the rate where NPV is zero, how it can mislead when projects compete, and what happens with unusual cash flows.40 min
- 4.4Payback and capital rationingPayback and discounted payback, what they miss, and ranking projects when the budget is fixed.35 min
Templates in this module
These templates are in the Accounting and Finance Toolkit, Complete Track 1. Each lesson shows the method and the worked numbers, so you can build the same file in any spreadsheet.
- Time value workbook XLSX, in the complete toolkit
- NPV workbook with sensitivity XLSX, in the complete toolkit
- IRR and project comparison workbook XLSX, in the complete toolkit
- Payback and ranking workbook XLSX, in the complete toolkit