Kurumsal Finans ve Strateji Rehberi | Finance & Strategy Insights

Evaluating investment projects is a critical process for businesses. In this article, I will explain step-by-step how to analyze two different projects using the Net Present Value (NPV) and Profitability Index (PI) methods with a discount rate of 46%.

Scenario: Two Investment Projects

Project A Cash Flows:

• Period 0: -700,000 TL
• Period 1: -150,000 TL
• Period 2: 450,000 TL
• Period 3: 900,000 TL
• Period 4: 1,200,000 TL
• Period 5: 800,000 TL

Project B Cash Flows:

• Period 0: -1,200,000 TL
• Period 1: 350,000 TL
• Period 2: 700,000 TL
• Period 3: 1,200,000 TL
• Period 4: 1,400,000 TL
• Period 5: 600,000 TL

Discount Rate: 46%

1. Net Present Value Calculations

Project A NPV Calculation:
NPV = [-700,000 / (1 + 0.46)^0] + [-150,000 / (1 + 0.46)^1] + [450,000 / (1 + 0.46)^2] + [900,000 / (1 + 0.46)^3] + [1,200,000 / (1 + 0.46)^4] + [800,000 / (1 + 0.46)^5]

Step-by-step calculation:

• -700,000 / 1 = -700,000
• -150,000 / 1.46 ≈ -102,739.73
• 450,000 / 2.1316 ≈ 211,105.27
• 900,000 / 3.112136 ≈ 289,194.74
• 1,200,000 / 4.54371856 ≈ 264,100.86
• 800,000 / 6.633829 ≈ 120,594.00

NPV_A = -700,000 – 102,739.73 + 211,105.27 + 289,194.74 + 264,100.86 + 120,594.00 = 82,254.14 TL

Project B NPV Calculation:
NPV = [-1,200,000 / (1 + 0.46)^0] + [350,000 / (1 + 0.46)^1] + [700,000 / (1 + 0.46)^2] + [1,200,000 / (1 + 0.46)^3] + [1,400,000 / (1 + 0.46)^4] + [600,000 / (1 + 0.46)^5]

Step-by-step calculation:

• -1,200,000 / 1 = -1,200,000
• 350,000 / 1.46 ≈ 239,726.03
• 700,000 / 2.1316 ≈ 328,385.25
• 1,200,000 / 3.112136 ≈ 385,592.99
• 1,400,000 / 4.54371856 ≈ 308,117.67
• 600,000 / 6.633829 ≈ 90,445.50

NPV_B = -1,200,000 + 239,726.03 + 328,385.25 + 385,592.99 + 308,117.67 + 90,445.50 = 152,267.44 TL

NPV Result: Project B (152,267.44 TL) > Project A (82,254.14 TL)

2. Profitability Index Calculations

Project A PI Calculation:
Present Value of Cash Inflows = 211,105.27 + 289,194.74 + 264,100.86 + 120,594.00 = 884,994.87 TL
Present Value of Cash Outflows = 700,000 + 102,739.73 = 802,739.73 TL
PI_A = 884,994.87 / 802,739.73 ≈ 1.102

Project B PI Calculation:
Present Value of Cash Inflows = 239,726.03 + 328,385.25 + 385,592.99 + 308,117.67 + 90,445.50 = 1,352,267.44 TL
Present Value of Cash Outflows = 1,200,000 TL
PI_B = 1,352,267.44 / 1,200,000 ≈ 1.127

PI Result: Project B (1.127) > Project A (1.102)

Evaluation and Conclusion

Both methods indicate that Project B is more advantageous. The NPV method measures absolute return, while the PI method assesses the efficiency of invested capital.

Investment Decision: Project B outperforms in both absolute return and capital efficiency. Therefore, selecting Project B would be a more rational decision for the company.

These calculations can guide your investment decisions. Remember that every investment project has its unique conditions, and using multiple methods together provides the most reliable outcome.