1. Tour of Payback
So as you can see down here, we're on the payback tab on
this particular Excel file, we wanna give you some tips on how to
complete this exercise. First up, let's go down here and calculate the cumulative
cash flow, so we could do this by putting in the equation where
we're adding this empty cell to this new cash flow of minus $130
million, hitting enter. Now we can highlight across just like this and hit
Ctrl+R just to copy them to the right.
So we can already see how quickly the company has paid back its
capital. In one year, it wasn't paid back 'cause it was still negative.
Year two, year three, but then in year four were already in positive
territory, so that means somewhere between year three and year four,
the capital was paid back. So you already know that the payback period
is gonna be between three and four years, but you need to calculate
it. We're looking for a formula in here down in these cells which
will detect when this is switched from negative to positive. And when it
has, we want you to try to calculate exactly the payback period.
You know it'll be three point something, but we want you to calculate
it exactly. And all we're gonna do down in this cell is put
in a SUM function that sums all the way across here,
and brings that payback period figure nicely into the cell.
Now, the formula that you're gonna need in here is definitely really tricky.
Do not feel badly if you struggle with it or if you can't
get it. If you really struggle with it and you can't get there,
then we'll see you soon and we'll walk you through it.
Good luck, and give it a good try.
2. Let's practice!