Net Present Value Calculator

Among the lessons of this month’s whiteboard is that determining the value of an IT project isn’t just a matter of subtracting the costs from the benefits.

The cash flows from an IT project are also greatly affected by such factors as corporate taxes, while the net present value of the cash flows are a function of the discount rate and the time period.

This Microsoft Excel spreadsheet allows you to see for yourself how the scaling factor in column C—changes in the various inputs into the cash flow analysis for year three of the Amalgamated Widget case study presented in the whiteboard—affect the net present value of the cash flow from the project. (All interactive input rows are highlighted in light blue.)

Try raising the amount of the taxes that must be paid on the gross earnings—for instance, to 150 percent of the taxes shown in column B in the example—and you can watch the net present value of the cash flow decline by 20 percent.