Net Present Value and Excel Functions

The video tutorial explains how to decide between leasing or purchasing a computer by comparing costs. It demonstrates calculating the net present value (NPV) of lease payments using Excel and explores different scenarios with varying lease amounts and interest rates. The tutorial also shows how to manually calculate NPV and use Excel's IF function to make informed decisions.

What is the initial cost of the computer in the lease vs purchase decision example?

• $3,000

• $2,500

• $2,000

• $1,500

How much is the annual lease payment for the computer?

• $800

• $700

• $600

• $500

What is the total cash flow for purchasing the computer?

• $3,000

• $2,000

• $2,500

• $1,500

Which Excel function is used to calculate the net present value of leasing?

• AVERAGE

• VLOOKUP

• SUM

• NPV

What is the interest rate used in the initial NPV calculation?

• 12%

• 10%

• 8%

• 6%

What is the purpose of using the NPV function in Excel?

• To determine the net present value of cash flows

• To find the future value

• To calculate the total cost

• To compute the average cost

If the lease payment is reduced to $580, how does it affect the decision?

• Lease becomes more expensive

• Purchase becomes more expensive

• No change in decision

• Lease becomes less expensive

What happens to the purchase option if the bank interest rate increases to 12%?

• Both options become more expensive

• Purchase becomes cheaper

• Lease becomes cheaper

• No change in cost

What is the present value of $580 one year from now at an 8% interest rate?

• $500

• $517.86

• $580

• $550

How is the present value of future cash flows calculated in Excel?

• By multiplying by the interest rate

• By subtracting the interest rate

• By dividing by 1 plus the interest rate raised to the power of the year

• By adding the interest rate