Computation Using Excel Spreadsheet Discussion

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Using Excel spreadsheet one can easily compute the NPV of a stream. Place the initial investment number in cell A1(using a negative, such as -1000 ), and then the cash flow that emanates from the investment in cells B1, C1 and so on (or you may chose to list the amounts vertically). Then use the NPV function to compute the NPV (be sure you place the rate and values in the correct place) . Consider the following example: Investment of 1000 (now), followed by net cash flow of 580 in one year and another 580 in two years. consider a cost of capital or a discount rate of 0.08 (8%). Use the Excel spreadsheet to compute the NPV of the investment. Then please use a simple calculator to do the same computation. Show your work. Do you get the same result? Are you sure? Tell me what you think of this little exercise.