this instant would cost them $650,000.

And then provide for the next ten years, starting a year from now end of year one,

provide them with the net positive cash flow of a 100,000 a year.

And Lukoil believes that based on many gas station renovation,

it's done in this country, that it's opportunity cost of capital or

ROCC for this kind of project is 8%.

So what I'd like to do in Excel with you is find

the NPV of this project and I'd also like to

look at the IRR of this project, although it's not stated here.

And then answer the question should Lukoil go ahead, and

finally, why or why not.

To do that, we're going to jump into

an Excel spreadsheet that shows information very much like this.

So, let's jump in to the Excel right now.

Is also available to you in Coursera.

Okay, so as you can see I've now jumped to the spreadsheet.

This is in your spreadsheet time value in DCF examples.

To show you how we would go about solving this in the real world using XL.

So the first thing I've got here is for

Lukoil I've got their opportunity cost of capital.

Up here and I'm going to be working initially on finding the projects NPV.

And what you want to do is you want to layout

the key items that you've got going here.

And you want to have time zipping the wrong here,

in our case years, could be months, could be quarters, doesn't matter.

And then underneath the time

row we want to have the cash flow that happens at that time.

So t equals zero beginning of project.

Lukoil's going to have to spend 650,000 so I have that as a negative number.

And then for the next ten years,

they think their net cash flow in is going to be 100,000.

Okay, so as we know, to compute the NPV of this project,

we're going to have to take each cash flow and

translate it back to its equivalent at t equals zero.

That way all the cash flows will be on an apples to apples basis.

Once we've gotten them on apples to apples basis we simply add them all up.

Every cash flow for one query at a time, for

one project at a time, we add them up and if the NPV is positive, it's a go.

And if it's a negative or equal to 0, it's not a go.

Okay, so I'm going to start with this 650,000 cash flow so

I've got that, I want the present value of it here in C10.

So I'm going to say =C9, the cash flow itself divide

by 1 plus the opportunity cluster of capital.

And I'm going to work that down which on the PC is function F4.

And that needs to be raised by the amount of time and

years that's passed since the beginning of the project which I have laid up here.

So your time is passed in CA, okay.

So that's looking good, the cashflow at t equals zero discount and

back to t equals zero should just be the cashflow itself.

I think this is a pretty general formula.

So I'm going to just drag it across, all the way through to my tenth year.

And always good to check, so I'm going to check my tenth year