Bonus question: Most spreadsheets do not have a built-in formula to calculate the payback period. Write a macro that calculates the payback period for a project.

You have set up a new firm in Copenhagen to produce mobile face recognition technology for all new smartphones. An opportunity has arisen that would result in a new contract with a major mobile phone manufacturer that would massively transform your firm’s operations. The contract would require a significant upfront investment of €50 million and the contract would last for eight years. The year after the contract has ended (that is, in year 9), your firm will bear all decommissioning costs, which are expected to be €8 million. The expected cash flows each year from the contract are shown in the following table. Davies Electronics has a 12 per cent required return on all of its technologies but can only reinvest future cash flows at a rate of 10 per cent.
Year Cash Flow (€)
0 –50,000,000 1 6,000,000 2 9,000,000 3 17,000,000 4 23,000,000 5 20,500,000 6 14,000,000 7 11,000,000 8 7,000,000 9 –8,000,000