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Copyright © 2002, Joel Anderson

Discounted Cash Flow ... Compound Interest in Reverse

Null test:
           {   Flow
        Sum{ --------- = 0
           {  (1+r)^t

Typical spreadsheet cell:


   Observe sign of flows

    Discounted cash flow [DCF] is compound interest with time's arrow running backwards.
    Each flow is discounted by time, from the flow's date back to the initialization date (today). This is done by iterating a guess-rate into a discount formula stack, one formula for each flow, until the null value is zero [0].
    DCF can be done in any spreadsheet for any timebase - and can be more accurate than XIRR.
    XIRR is easier but less intuitive.

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Discounted Cash Flow spreadsheets:
     Choose filetype for your spreadsheet:
         Excel 5 with XIRR and DCF formula(s) 
         Lotus 97 with XIRR and DCF formula(s)
         Lotus2.2(DOS), DCF formulas are a must w/o XIRR
Files should open okay in any industrial-strenght spreadsheet.

M$ Works 4.5a doesn't support @datevalue or XIRR functions. A later version might. Try it. WK1 and XLS files can be viewed in M$ Works 4.5a by striking Okay (many times) to pass the error prompt when it appears. Offending formulas will load as numbers.