NPV and IRR explained

[@TheFinanceStoryteller]

Lots of exciting and helpful new videos coming up! Be sure to click the like button, subscribe and turn on notifications to ensure you don't miss anything. Now that you learned how the NPV and IRR concepts work, your next step is to understand the impact of various scenarios on the NPV and IRR outcomes: kzbin.info/www/bejne/Z4u3eqqjo5Z2o5I

[@j.revathireva4909]

😊

[@ibsamohamed740]

I can't thank you enough. I really can't. You explained to me 2 weeks worth of materials in less than 10. God bless you

[@TheFinanceStoryteller]

So happy to hear that, Ibsa Mohamed! That is wonderful. Thank you for commenting. I think you should watch the NPV IRR payback scenario video next to understand this even better :-) kzbin.info/www/bejne/Z4u3eqqjo5Z2o5I

[@nickyanna3571]

This single video has just taught me a full term of university coursework... Somebody remind me why I'm paying £9k a year

[@TheFinanceStoryteller]

@@nickyanna3571 Thank you! That is both a hilarious as well as saddening statement on the experiences of university education. Get your certificate and get out of there into the real world! ;-)

[@cliftonaurelius3060]

I can't.thank you more. I was in class and completely clueless what the lecturer was teaching. As a slower learner, you're really a blessing to us. Thank you so so so much ❤️

[@TheFinanceStoryteller]

You're welcome, Clifton! I have a few more NPV and IRR examples for you in this video: kzbin.info/www/bejne/Z4u3eqqjo5Z2o5I and recently finished a video on the related topic WACC kzbin.info/www/bejne/Z4CQdZWqi9qYg9k

[@abidullahkhamosh2099]

I did not understand where does this 35, 117 en (46) come from? how has he this calculated

[@cliftonaurelius3060]

@@TheFinanceStoryteller thank you! I needed the WACC video and you made it. So timely.

[@TheFinanceStoryteller]

@@cliftonaurelius3060 You're welcome, Clifton! Glad to hear that.

[@TheFinanceStoryteller]

@@abidullahkhamosh2099 Hello Abidullah! Let me walk you through the formula to arrive at $117 in project B, then you can replicate the same calculation for the other projects A and C. The undiscounted cash flow in project B are Year0 ($1000) Year1 $600 Year2 $500 Year3 $300 Year4 $200. The discounted cash flows for those are are ($1000) + $600/1.2 + $500/1.44 + $300/1.728 + $200/2.0736. If that is still confusing, then watch the related video specifically on NPV: kzbin.info/www/bejne/hF7Pf2iuhLd8rcU

[@konstancyja82]

Finally, explained in a way thats easy to understand! I suggest all PMP students to watch it!

[@goddessalumni2355]

🤦🏽‍♀️🥰🤘🏽

[@loveelykiim1001]

currently reviewing for my cma exam and i kind of struggling with this topic but you explained it in just 6 minutes and i can't thank you enough! you are a lifesaver!

[@TheFinanceStoryteller]

Happy to help! I have a playlist for you with related topics like payback, discounted payback, WACC, etcetera: kzbin.info/www/bejne/Z4CQdZWqi9qYg9k&pp=gAQBiAQB

[@loveelykiim1001]

@@TheFinanceStoryteller thank u so much!

[@TheFinanceStoryteller]

@@loveelykiim1001 Please share with your fellow students!

[@Hoshi_Poshi]

I'm italian and I was struggling with this for a course in english, thank you this video is very easy to understand!!!

[@TheFinanceStoryteller]

Ciao! Very happy to hear that. Greetings from the Netherlands!

[@starm5556]

@@TheFinanceStoryteller Hey. Well explained. How did you get the cash inflows for each? How do you determine the value of each project and which to choose, besides comparing npv. Does a higher or lower irr rate matter ? As well as payback period ? Would you choose an early payback period project that offers a lower amount with a wacc of 12.5% payback of 1,5 years and net present value of 850 000 with irr of 11% or.... a project with a wacc of 12.5% at a period of 2.7 years and Npv of 1500 291 with irr of 19.26% and why ?

[@lukasrohler2074]

I’m American and I was struggling as well, I’m convinced finance is it’s own language and culture haha thanks for making this video!

[@bonganimanini7748]

Best NPV and IRR explanation I've ever heard. Thank you

[@TheFinanceStoryteller]

Happy to hear that, Bongani! I have videos on related capital budgeting techniques for you in this playlist: kzbin.info/www/bejne/kKarkKRrmNd0jck

[@alihussainkurbanhussainbhi7748]

I really can't thank you enough. I wish I had a teacher like you. God bless you. Amen

[@TheFinanceStoryteller]

Happy to help! I can be your virtual teacher on KZbin! Here is the link to a playlist with related videos like WACC: kzbin.info/www/bejne/Z4CQdZWqi9qYg9k

[@johannakenwood3359]

Omg thank you so much!! A lecture and multiple videos later, your video finally explained it thoroughly in under 4 mins. 3 years and a pandemic later your videos still teaching!!

[@TheFinanceStoryteller]

Great to hear, Johanna! Yes, this video has been very successful, and I am happy that so many people found it useful to understand capital budgeting concepts. Here's the playlist with related terminology on WACC etcetera kzbin.info/www/bejne/hF7Pf2iuhLd8rcU

[@johannakenwood3359]

@@TheFinanceStoryteller thank you I will be needing it! Just started supply chain management last week. Thanks so much!!!

[@TheFinanceStoryteller]

@@johannakenwood3359 You have come to the right place! Here are my thoughts on inventory management: kzbin.info/www/bejne/eovLeYaIacRseJY

[@kaustubhnarkar9820]

my dear friend this is one of the best ways you have explained these concepts , they don't explain this as good in universities and professional finance courses really kudos to you mate .

[@TheFinanceStoryteller]

Thank you so much for the kind words, Kaustubh! I approach each and every video from the real world perspective. Please subscribe to the channel, and take a look at the NPV IRR WACC playlist for more related videos: kzbin.info/www/bejne/hF7Pf2iuhLd8rcU

[@AndresSanabriaMusic]

A semester in less than 10 minutes

[@TheFinanceStoryteller]

Wow, thank you, that's a great compliment. Here's the link to the playlist with related concepts like WACC, crossover rate, etc kzbin.info/www/bejne/hF7Pf2iuhLd8rcU

[@Earth_By_Board]

I’m thinking of getting into accounting. Is this exaggerated? 😂

[@lilnine3293]

@@Earth_By_Board yeah its very exaggerated, its more like a week or 2

[@lsansco3012]

@@Earth_By_Board yes. It’s covered in one lesson for like 20 minutes.

[@alexnumssen2098]

Not really

[@vikram_sekar]

Excellent. The perfect video which cleared all my queries on NPV and IRR and provided a base on these concepts. Covered what is it and how to calculate it. Thanks for posting this awesome video.

[@TheFinanceStoryteller]

Thank you, thank you, thank you for the very kind words! Happy you enjoyed it. Please tell all your friends and colleagues about it. ;-) Here's the link to two "bonus videos" on how to calculate NPV and IRR in Excel: NPV kzbin.info/www/bejne/oILCf3eHZ9aJjKM IRR kzbin.info/www/bejne/gmGtdJprib2omsU

[@jlee8]

I wish I had access to your videos during University. This is one of the best and clear explanations of NVP and IRR. Thank you

[@TheFinanceStoryteller]

Wow, thank you, Jenny! Please spread the word. Here is the link to my playlist with more capital budgeting content: kzbin.info/www/bejne/hF7Pf2iuhLd8rcU

[@rauljimenez5485]

I am loving your short and concise videos. They cover the key concepts and make them very clear!!

[@TheFinanceStoryteller]

Thank you for the kind words, Raul! Hope there are more videos on the Finance Storyteller channel that are useful to you. Please spread the word to friends and colleagues! :-)

[@abidullahkhamosh2099]

I did not understand where does this 35, 117 en (46) come from? how has he this calculated?

[@endangeredspecies5005]

@@abidullahkhamosh2099 35 came from calculating the future discounted cash flows of 333+278+231+193 which is equal to 1035 and subtracting this 1035 from the initial investment of 1000 and you got this 35. i hope this will help you.

[@robertbotta6536]

Without a doubt the best explanation of npv and irr on KZbin. Thank you.

[@TheFinanceStoryteller]

Thank you very much, Robert! Wonderful to hear that.

[@konstancyja82]

Just used this video for my pmp exam learning. Valueable information in just few minutes.... Thank you

[@TheFinanceStoryteller]

Thanks! Great to hear that. I think you will enjoy the follow-up video on NPV IRR payback scenarios as well, for a deeper understanding: kzbin.info/www/bejne/Z4u3eqqjo5Z2o5I

[@태공-y2j]

Man. you are a great teacher! Many folks make it hard to understand using jargons and stuff. never understood 100% but now I have nailed it. Thanks so much!

[@TheFinanceStoryteller]

Thanks for the kind words! Very happy to hear that! I have many more related videos on WACC, payback period, etcetera that could be helpful for you: kzbin.info/www/bejne/hF7Pf2iuhLd8rcU Please subscribe, and spread the word to fellow students!

[@omarzeyad1382]

thank you so much for this video, I spent 3 Hr trying to understand this on the MBA module material, but now its cristal clear after seeing this video

[@TheFinanceStoryteller]

You're welcome! Great to hear that, Omar. I have videos for you on related topics like WACC as well kzbin.info/www/bejne/Z4CQdZWqi9qYg9k Please spread the word to fellow students!

[@김수연-z2o9f]

I don't know why, but I'm kinda addicted to the accent! lol thanks for the useful information! learned a lot!

[@TheFinanceStoryteller]

Thanks for watching!

[@nokuzolaholomisa6223]

Thank you so much, I'm writing tomorrow and I was just lost, everything is clear now. Thank you again x

[@TheFinanceStoryteller]

You're welcome! :-) My follow-up video on WACC vs IRR might also be helpful for you: kzbin.info/www/bejne/kKarkKRrmNd0jck

[@mooniebo2752]

easiest explanation I've seen. thank you! you've helped me prepare for my exam!

[@TheFinanceStoryteller]

Thank you for commenting! Wishing you all the best with your exam. Maybe the related video on WACC vs IRR can help you as well kzbin.info/www/bejne/kKarkKRrmNd0jck

[@rso143]

I can't thank you enough about this video, the concept of NPV which I heard yesterday which the professor was not able to explain and left me confused are now solved for just six minute video. although your calculation of IRR is not clear but will use Excel as I know basics of Excel. thank you so much

[@TheFinanceStoryteller]

Thank you for the compliments, Rayso! Yes, I agree I could have spent more time on IRR in this video. I made follow-up videos to go deeper into IRR, compiled in this playlist: kzbin.info/www/bejne/l4SbiXuQa7OAabc

[@themotobanditshow]

Thank you this is so simple for me to understand. Currently in my second year completing financial risk. Thanks!

[@TheFinanceStoryteller]

Great to hear. Please spread the word! :-)

[@nileshrathod3153]

Really explained well. I got in the first attempt. Before watching this video, I watched other videos, but I couldn't understand. Thank you for your efforts!!

[@TheFinanceStoryteller]

You're welcome, Nilesh! Very happy to hear that. I think you will like the related video on NPV and IRR scenarios as well: kzbin.info/www/bejne/Z4u3eqqjo5Z2o5I

[@abidullahkhamosh2099]

I did not understand where does this 35, 117 en (46) come from? how has he this calculated

[@endangeredspecies5005]

i will bet a $10000 if the presenter is not from arabic descent. the accent is absolutely nourishing and left your spirit.

[@TheFinanceStoryteller]

Personally, I enjoy good videos regardless of the accent! ;-) But as you are asking, the accent is Dutch (i.e. from the Netherlands). I did spend a good amount of time delivering training in Abu Dhabi and Dubai, so had the pleasure of visiting the Middle East multiple times.

[@abusufian8667]

This video is very crucial to understand the core concept of AFM....thank you!

[@TheFinanceStoryteller]

Thank you very much for the kind words! Related concepts like WACC are discussed in this playlist: kzbin.info/www/bejne/Z4CQdZWqi9qYg9k

[@nimidi2568]

Shortest and best way to understand the concept. Thanks

[@TheFinanceStoryteller]

Glad it was helpful!

[@Dorotheen]

Thank you so much! I was having a hard time to understand the topic, but you were amazing in clarifying it.

[@TheFinanceStoryteller]

You're welcome! Please subscribe to the channel, I have related videos on topics like WACC and payback period as well.

[@zennmaiaguerrero8348]

The way how we solve it in business class way back in uni was a shortcut so after months, it was already forgoten. Thank you for explaning the basis of it. Def understand it now. 😊

[@TheFinanceStoryteller]

Glad it helped! Here are some more examples to really "get" the deeper ideas behind the calculations kzbin.info/www/bejne/Z4u3eqqjo5Z2o5I

[@Holland1994D]

Hey je bent Nederlands! Thanks, duidelijk uitgelegd, jammer dat ik nu pas je video zie ipv voor mijn tentamen. Gelukkig snap ik het nu wel een stuk beter voor het hertentamen!

[@TheFinanceStoryteller]

Jazeker! Welkom! Beter laat dan nooit. ;-) Veel succes met je hertentamen. Hier is de link naar een playlist met alle NPV/IRR gerelateerde termen (ook payback, WACC, etc.): kzbin.info/www/bejne/hF7Pf2iuhLd8rcU

[@Zwart-in6vc]

@@TheFinanceStoryteller wat is nou precies de relatie tussen de npv en IRR? Deze vraag krijg ik op mijn assessment

[@TheFinanceStoryteller]

@@Zwart-in6vc Dat draait om wat je als input neemt, en wat als output. Kort samengevat in het Engels: NPV Step 1) Determine nominal (undiscounted) cash flows , Step 2) Apply discount rate to calculate present values, Step 3) Calculate Net Present Value (NPV) by summing the discounted cash flows. IRR Step 1) Determine nominal (undiscounted) cash flows, Step 2) Set NPV at 0, Step 3) Calculate Internal Rate of Return (IRR) through trial and error, or Excel. Zie ook: kzbin.info/www/bejne/l4SbiXuQa7OAabc

[@jamesperry3837]

_Your videos r_ *super.* _Concise and to the point of understanding._ *Tysm*

[@TheFinanceStoryteller]

You're welcome, James! Thank you for watching and commenting.

[@FunnyAsian00]

I hate math and I'm sociology major but I understood this guy is a genius

[@TheFinanceStoryteller]

Thank you, John! Happy to help. 😎

[@MundaneMuser]

My brain hurts.

[@ThorBash]

It’s easy bro

[@mathijs9365]

Like the clear explanation. But this is a very scientific approach. There are so many factors which cant be moddeled.

[@TheFinanceStoryteller]

That's why it's a good idea to specify when doing these calculations: what your assumptions are (what you know for sure and what you assume), and what could be the impact of things you are not sure of. After the investment has been made, when you know what the actual investment cash outflow was and the actual benefits start coming in, it's advisable to check (with hindsight) whether the original assumptions were correct, and learn from any variances.

[@mathijs9365]

@@TheFinanceStoryteller my opnion a model is never accurate. Even though u want to learn the next project will be different. Unless these are static projects and u do it often. I meant factors outside your control. Or just have the balls to invest even it it looks financial negative. If financial persons could decide wether a project or investment should go/no go the world would never step forward.

[@TheFinanceStoryteller]

I think you are being overly negative about finance people, Mathijs. We are not in business to stop any and all investment projects from happening, we just want to help prioritize and rank the various projects from most attractive to least attractive, based on strategic, financial and EHS criteria. Narrowing down an overly long list of requests for CapEx budget to the ones we want to fund, and then go ahead to build and grow.

[@mathijs9365]

@@TheFinanceStoryteller Hi. I self have a Finance audtor education. But since Im working in the ICT industry and follow companies my opinion has been strengthen. I acknowledge good finance is very important. But engineering and entepreneur is much more crucial for having succes in business. Finance is just an outcome of good/bad business. Thats just my opinion. Keep up the good work in educating finance ppl.

[@Anna_Australia]

I finally found your video, which helps me a lot!

[@TheFinanceStoryteller]

Glad to hear it! More NPV, IRR, payback, WACC and related concepts discussed in this playlist: kzbin.info/www/bejne/hF7Pf2iuhLd8rcU

[@rummanamarzia1288]

Thank u so much sir.. Understood many things what didn’t in class....

[@TheFinanceStoryteller]

Thank you, Rummana! Happy to hear that. And well done searching for additional information to expand what was covered in class! I think you will like my NPV/IRR scenarios video as well that covers these concepts with more examples: kzbin.info/www/bejne/Z4u3eqqjo5Z2o5I

[@theboy4159]

This was so straightforward and easy thank you so much

[@TheFinanceStoryteller]

Glad it helped! Related videos on topic like WACC, and discounted payback can be found in this playlist: kzbin.info/www/bejne/Z4CQdZWqi9qYg9k&pp=gAQBiAQB

[@kedard134]

Thank you for explaining this is a simple no fuss manner.

[@TheFinanceStoryteller]

Yeah, let's get it done in 5 minutes, if we can, and move on to the next topic. 😎

[@cortney4soul]

The best breakdown i have seen.

[@TheFinanceStoryteller]

Thank you, Cortney! That is wonderful to hear. More capital budgeting videos in this playlist: kzbin.info/www/bejne/hF7Pf2iuhLd8rcU

[@vanderpant2116]

Thank you for a clear concise and easy to understand vid 😁

[@TheFinanceStoryteller]

Very happy to hear that! Thank you.

[@kekelidenutsui6517]

You made it all. Am loving it🔥👌

[@TheFinanceStoryteller]

Yes! Thank you!

[@notevoyadarminombre156]

You deserve a cookie. Thank you very much for this explanation.

[@TheFinanceStoryteller]

You're welcome! Opportunity to buy me cookies, a cup of tea, etc. at: kzbin.info/door/QQJnyU8fALcOqqpyyIN4sgjoin ;-)

[@HazaraspFEZ]

The best explanation. Thank you !

[@TheFinanceStoryteller]

Thank you very much for the compliment. Related topics like WACC and payback period are discussed in this playlist: kzbin.info/www/bejne/Z4CQdZWqi9qYg9k&pp=gAQBiAQB

[@SharonD88]

Wahoo I want to say thank you, your explanation is the best for me, really easy, 💖🙏thank you. I will check all your content. 👍1,000

[@TheFinanceStoryteller]

You're welcome 😊 I have related videos on WACC, profitability index, etc. as well for you: kzbin.info/www/bejne/Z4CQdZWqi9qYg9k

[@ashwinudapikar3290]

Very well explained! Thank you so much for the video!

[@TheFinanceStoryteller]

Great to hear that, Ashwin! Thank you for watching, and welcome to the channel. :-)

[@youjoo-l6p]

Thank you for your easy and clear explanation.

[@TheFinanceStoryteller]

You're welcome!!!! Thank you for watching and commenting.

[@todddahlquist7584]

I finally understand the difference - thank you!!

[@TheFinanceStoryteller]

Great to hear that, Todd! Happy to help. :-)

[@abidullahkhamosh2099]

I did not understand where does this 35, 117 en (46) come from? how has he this calculated

[@OsaroOyegun]

Another concise and well explained video. Thank you!

[@TheFinanceStoryteller]

Thank you! Happy to hear you enjoyed it.

[@Jhangerr]

Simple and good explanation. Thank you.

[@TheFinanceStoryteller]

You're welcome! :-)

[@JohnRMTurner]

Great video. Thanks for explaining this with a simple example.

[@TheFinanceStoryteller]

Glad it was helpful, John!

[@kevinharilal8288]

Dude your videos are really good. I appreciate your assistance tremendously

[@TheFinanceStoryteller]

Thank you, Kevin! That's awesome. Working on my next video right now. Happy to help!

[@MM-zd4md]

awesome explanation. Thank you !

[@TheFinanceStoryteller]

Good to hear that. Glad it was helpful! Videos on related topics like WACC and discounted payback are available in this playlist: kzbin.info/www/bejne/Z4CQdZWqi9qYg9k&pp=gAQBiAQB

[@michelleou9814]

Thank you so much for the clear explanation! I didn't quite get how we arrived at 35 for the NPV of project A though; since the NPV values of the following years are so large, if we add them together, how do we come to 35? Thank you so much!

[@TheFinanceStoryteller]

Glad it helped! 35 came from calculating the present value of the future cash flows of 333+278+231+193 which is equal to 1035 and deducting the initial investment of 1000 from this, and you got this 35.

[@indiva702]

@@TheFinanceStoryteller I had the same exact question. Thanks for this explanation.

[@abheranmoodley4950]

Thank you very much for this video! It is very clear and easy to understand.

[@TheFinanceStoryteller]

Glad to hear that, Abheran! Related concepts like WACC, payback period and crossover rate are covered in this playlist: kzbin.info/www/bejne/hF7Pf2iuhLd8rcU

[@TeachAManToAngle]

You really do a great job explaining this. It had been years since I learned this in business school. Very good refresher

[@TheFinanceStoryteller]

Glad it was helpful! I have related videos on payback period, WACC, etc. as well for you as a refresher: kzbin.info/www/bejne/Z4CQdZWqi9qYg9k

[@networkteamtools6528]

you've made complicated things, simple.... well done✊

[@TheFinanceStoryteller]

Thanks a lot! 😊 Very happy to hear that!

[@jngf100]

Very clearly explained - thanks kindly!

[@TheFinanceStoryteller]

You're very welcome!

[@olayinkaafun5469]

Concise and straight to the point. Thank you.

[@TheFinanceStoryteller]

Exactly, Olayinka! :-) Here's the link to related videos on capital budgeting that could be helpful for you as well kzbin.info/www/bejne/Z4CQdZWqi9qYg9k

[@olayinkaafun5469]

@@TheFinanceStoryteller Thanks alot.

[@TheFinanceStoryteller]

@@olayinkaafun5469 You're welcome! Let me know if you think any topics are missing, I am always looking for good topics for new videos.

[@curtiscurry5775]

You made it all make sense! Thank you!

[@TheFinanceStoryteller]

Wonderful to hear that!!! Thank you for watching and commenting. 😊

[@janifahbadio6684]

This is a simple and great explanation. Thank you so much :)

[@TheFinanceStoryteller]

Glad you liked it, Janifah! Thank you for watching and commenting. My follow-up video on NPV IR payback period scenarios might also be useful for you to watch: kzbin.info/www/bejne/Z4u3eqqjo5Z2o5I

[@elanalistafinanciero]

Excellent presentation, Thanks so much !!!

[@TheFinanceStoryteller]

You are welcome! 😊 Please spread the word!

[@stevenyang9682]

thanks a lot! this is much clearer than lecture!

[@TheFinanceStoryteller]

Great to hear that, Steven! Thank you for watching. I also cover related topics like WACC, crossover rate, and profitability index on my channel.

[@endragoth]

Thanks a lot for sharing, very educational and useful

[@TheFinanceStoryteller]

My pleasure! Related concepts like WACC are discussed in this playlist: kzbin.info/www/bejne/Z4CQdZWqi9qYg9k&pp=gAQBiAQB Please spread the word to friends and colleagues.

[@shivaharni1365]

Thank you ! Made it easy to understand!!!

[@TheFinanceStoryteller]

Happy to help! Discussion of related concepts in the videos of this playlist: kzbin.info/aero/PLKbmcnUUQMlkkCqQs7M_b6ktTDLITcRoG

[@cheriewong4548]

omg you explained this so well... im so amazed!!!! THANK YOUUUUUUUUUU

[@TheFinanceStoryteller]

Happy to help, Cherie!!! :-)

[@cheriewong4548]

@@TheFinanceStoryteller Subscribed & liked. keep it up :-)!!!

[@TheFinanceStoryteller]

Wonderful. :-) Please tell all your friends!

[@mamtasaravanan985]

Very nicely explained.Love your videos.

[@TheFinanceStoryteller]

Thank you so much, Mamta! 🙂 That is nice to hear. Please spread the word!

[@dreams_in_a_pie]

Perfect!!! I understand what NPV and IRR are!

[@TheFinanceStoryteller]

Great to hear that! Thank you! :-)

[@abidullahkhamosh2099]

I did not understand where does this 35, 117 en (46) come from? how has he this calculated

[@dreams_in_a_pie]

@@abidullahkhamosh2099 For NRV project A 35 333+278+231+193-1000=35 Same calculation for project B and C

[@saodatkurmanayeva434]

this helped so much, you're a saviour!

[@TheFinanceStoryteller]

Happy to hear that, Saodat! Please spread the word!

[@slay9470]

Thank you bro you deserve a like

[@TheFinanceStoryteller]

Happy to help! Have a look at the related videos in the NPV IRR WACC playlist as well, there could be more useful stuff in there: kzbin.info/www/bejne/Z4CQdZWqi9qYg9k&pp=gAQBiAQB

[@divinitytarot6]

THANKS SIR, PLEASE MAKE MORE VIDEOS ON pay back period

[@TheFinanceStoryteller]

You're welcome! Here is a link to my video on payback period kzbin.info/www/bejne/fHvNeJxtnNh-aaM ROI vs payback kzbin.info/www/bejne/pWXSl2Srg7iFn9U and my video on NPV IRR payback scenarios kzbin.info/www/bejne/Z4u3eqqjo5Z2o5I

[@sethvidana4210]

great explanation

[@TheFinanceStoryteller]

Thank you!!! :-)

[@ericbertoldo1056]

I appreciate your work on these videos and making it easier for others to understand. On the things I didn’t understand you answered those who had questions below. Great work!

[@TheFinanceStoryteller]

Wonderful to hear that, Eric! Thank you for watching and commenting. The questions from viewers indeed helped to clarify some points. I have made a video on NPV and IRR scenarios as a follow-up: kzbin.info/www/bejne/Z4u3eqqjo5Z2o5I

[@divinitytarot6]

Thanks Sir, kindly make more videos.

[@TheFinanceStoryteller]

Will do! You can expect one or two new ones per week in the near future.

[@divinitytarot6]

@@TheFinanceStoryteller Sir, please make videos specially example related and crashing of stock market. really grateful, love from India

[@TheFinanceStoryteller]

@@divinitytarot6 Good suggestion, thank you! I will add it to my list of potential topics.

[@kennethromanowski9614]

Excellent presentation. Concise and precise.

[@TheFinanceStoryteller]

Thank you very much, Ken! Great to hear that. I think you might also enjoy the related video on ROI versus payback: kzbin.info/www/bejne/pWXSl2Srg7iFn9U

[@TheExceptionalState]

Clear and concise! Thank you!!!

[@TheFinanceStoryteller]

Nice to hear that! Thank you, Angus!

[@motalibhossain3971]

very good explanation, thank you

[@TheFinanceStoryteller]

Nice to hear that, Motalib! Thank you for watching and commenting.

[@mr.learner3884]

Nicely explained

[@TheFinanceStoryteller]

Thank you, Owais!

[@haphuongnguyen988]

Thank you so much for your easy to understand lecture on NPV and IRR, they really saved me. Also can you tell me about why these two methods are used most often despite the existence of other evaluation methods. What are the differences of these two methods compared to other methods. Looking forward to your reply

[@TheFinanceStoryteller]

Thank you very much for the kind words. The main reasons NPV and IRR are so widely used versus other methods are in my opinion: these methods consider the time value of money, and they consider cash flows over the entire life of the project. Payback period does neither of the above, while discounted payback does the 1st but not the 2nd. Profitability index is even slightly better than NPV, as it relates the payoff to the investment. Have a look at the various methods in this playlist: kzbin.info/www/bejne/g5WYoJaEprB7p5o&pp=gAQBiAQB

[@manishkhanijo]

Very well explained

[@TheFinanceStoryteller]

Thanks for liking

[@mirnahanger9054]

Thank you, this was a very clear explanation or IRR.

[@TheFinanceStoryteller]

You're welcome! Happy to hear that. Related topics in this playlist: kzbin.info/www/bejne/hF7Pf2iuhLd8rcU

[@cncha6771]

what about future cash outflows? For example, a future cash outflow at T=3? Is the future cash outflow also discounted by the same discount rate to get the present value of the cash outflow?

[@TheFinanceStoryteller]

Correct!

[@PeterTamura]

Interesting, thanks for the great explanation. These calculations of course are subject to assumptions, it's not always easy to know the exact cash flow you will get in year 3. Also, if there are ways to reinvest the cashflows from year 1 and year 2 back into the project, the returns could be higher...

[@TheFinanceStoryteller]

Excellent points, Peter! I agree with you. I tried to keep it as simple as possible in the video. ;-)

[@Prk0499]

Thanks a lot Philip De Vroe!! 😊

[@TheFinanceStoryteller]

You're welcome, Poorvi Radhakrishnan! :-) Thank you for watching.

[@jaredbordere5993]

What do you mean by, "you simply sum across and find a NPV of 35"

[@TheFinanceStoryteller]

Summing across is adding up the amounts. ($1000) + $333 + $278 + $231 + $193 = $35. ($1000) is the cash outflow in year 0, $333 is the present value in year 0 of the expected $400 nominal cash inflow benefits in year 1, $278 is the present value in year 0 of the expected $400 nominal benefit in year 2, etc. Finance people have the habit of writing -$1000 as ($1000). The $1000 is a negative, a cash outflow, the other four numbers are positives. So the summation is negative/minus $1000 plus $333 plus $278 plus $231 plus $193, which in total is $35.

[@froufou100]

@@TheFinanceStoryteller and then how do you get the 22% IRR? Sorry if that sounds obvious, numbers are not my thing but have to learn it for my business analysis diploma :)

[@TheFinanceStoryteller]

@@froufou100 That is a good question! I have more detail on IRR in a specific video on the topic: kzbin.info/www/bejne/l4SbiXuQa7OAabc and can also show you in Excel how to calculate IRR kzbin.info/www/bejne/gmGtdJprib2omsU

[@ull893]

@@TheFinanceStoryteller Thanks for the reply. You should have explained that in the video.

[@TheFinanceStoryteller]

@@ull893 We learn step-by-step. Only after I finish a video do I realize what I could have explained better....

[@ashokboga3108]

Thanks for the Explanation, however, could anyone explain, how did we get IRR 22% against NPV 35 for the Project A. was there any formula. pls help with it if any Formula used?

[@TheFinanceStoryteller]

Hello Ashok! Apologies if that was not very clear in the video. I have made two follow-up videos using the same examples: Conceptual explanation of IRR kzbin.info/www/bejne/l4SbiXuQa7OAabc Calculating IRR in Excel kzbin.info/www/bejne/gmGtdJprib2omsU Hope these videos provide you more clarity!

[@shreeniwas048]

Wow very clearance of concept. You make it in simply.

[@TheFinanceStoryteller]

Thank you! Glad you enjoyed it. :-)

[@nomakhephunomcoyiya1135]

Thank you so much for video, however, you mention the formula that is used to calculate IRR in Excel. Please write it down for me as I have to manually calculate it for my exam!

[@TheFinanceStoryteller]

There's a formula for NPV, but not really for IRR. My video on WACC vs IRR explains you why: kzbin.info/www/bejne/kKarkKRrmNd0jck If you do get questions on IRR, they hopefully take the following form: the investment today is $200, the benefits in year 1 $110 and the benefits in year 2 $121. Hopefully it's easy to guess that 10% is the IRR here. Hope that helps!

[@SuperSG184]

Great video, just like to understand usually how a company should define the WACC?

[@TheFinanceStoryteller]

Hello Stanley! That is a good question! Here is the link to my video on WACC kzbin.info/www/bejne/Z4CQdZWqi9qYg9k and my video on WACC vs hurdle rate kzbin.info/www/bejne/bnbcd3-ahLmofrc

[@mrtural4977]

Thank you very much for good explanation

[@TheFinanceStoryteller]

You're welcome! :-)

[@meenamenon2219]

so so lucid! THANK YOU

[@TheFinanceStoryteller]

Thank you, Meena! Related topics are in this playlist: kzbin.info/www/bejne/hF7Pf2iuhLd8rcU

[@CydniMaeryce]

✅ 4:12 I’m just a normie teaching herself this equation but I’m lost right here.. how does that sum up to 35 ? My notes concluded the sum as 2,035. Can someone help me out please?

[@CydniMaeryce]

🎉 I’m back and now I understand this equation and where I went wrong. I didn’t deduct the investment amount and was very confused. I watched most of the other NPV vids and I’m very happy to say thank you for teaching me ❤ 4:12

[@TheFinanceStoryteller]

My apologies if that was not clear in the first round, but happy to hear you figured it out.

[@abbasnajam6935]

Very nicely explained :)

[@TheFinanceStoryteller]

Thank you, Abbas! That's good to hear. :-)

[@gabrielleherrin7300]

At 4:52 how did we decide that irr is 22% if we can’t use excel

[@TheFinanceStoryteller]

Hello Gabrielle! My apologies if that section went a bit too fast. Have a look at my video fully dedicated to IRR itself, hopefully that clarifies things: kzbin.info/www/bejne/l4SbiXuQa7OAabc

[@lhsgolf3]

How can I determine WACC?

[@TheFinanceStoryteller]

Have a look at this related video: kzbin.info/www/bejne/Z4CQdZWqi9qYg9k&pp=gAQBiAQB

[@betaeseta9249]

Why is the NPV 35???how do we find out???

[@TheFinanceStoryteller]

To get to NPV, you sum the present value amounts: $333 + $278 + $231 + $193 minus $1000 investment. I have made another video specifically on Net Present Value, approaching it in a slightly different way. Maybe that explanation works better for you: kzbin.info/www/bejne/hF7Pf2iuhLd8rcU

[@betaeseta9249]

@@TheFinanceStoryteller thank you... Really helpful second link.... '👍😊😊😊😊

[@TheFinanceStoryteller]

Great! Very happy to hear that. :-)

[@KiranKumar-gu9nt]

Summation of all the NPV for 4 years is 1035 and invetsed amount is 1000 and hence the difference is 35

[@winnieb3324]

How can I find IRR algebraically by hand? My exam does not allow use of excel.

[@TheFinanceStoryteller]

Hi Winnie! Good question, but that is beyond my mathematical abilities. Here's an explanation of how IRR fits into the NPV formula: kzbin.info/www/bejne/kKarkKRrmNd0jck

[@starm5556]

Hey. Well explained. How did you get the cash inflows for each? How do you determine the value of each project and which to choose, besides comparing npv. Does a higher or lower irr rate matter ? As well as payback period ? Would you choose an early payback period project that offers a lower amount with a wacc of 12.5% payback of 1,5 years and net present value of 850 000 with irr of 11% or.... a project with a wacc of 12.5% at a period of 2.7 years and Npv of 1500 291 with irr of 19.26% and why ?

[@TheFinanceStoryteller]

Hello! That's a long list of questions. In general, the higher the NPV, the better. The shorter the payback period, the better. The higher the IRR percentage, the better. I have compiled all my videos on NPV, IRR, payback, profitability index, etcetera in a playlist: kzbin.info/www/bejne/hF7Pf2iuhLd8rcU

[@DeshanTech]

Thanks clear explanation.

[@TheFinanceStoryteller]

Great to hear that! Thank you! Please subscribe.

[@DeshanTech]

@@TheFinanceStoryteller Already done, Hit the bell icon too.

[@mohd492]

Very good explanation thank u. I've a doubt, by what basis you took 20% as weighted average cost of capital.

[@TheFinanceStoryteller]

Hello Mohammed! Thank you for the compliment. Taking 20% as the WACC in the example was purely arbitrary, for illustrative purposes, to make the calculation more "dramatic", showing its impact on the present values that shrink. For a discussion on WACC: kzbin.info/www/bejne/Z4CQdZWqi9qYg9k

[@himanshusundli1799]

Great content

[@TheFinanceStoryteller]

Thank you! Please share the channel/videos with friends and colleagues.