CFI-Excel-eBook

The Corporate Finance Institute Excel
NPV
Get the Net Present Value (NPV) for periodic
cash flows
rate value1 value2
y
What is the NPV Function?
The NPV Function is categorized under Financial functions. It will calculate the
Net Present Value (NPV) for periodic cash flows. The NPV will be calculated for
an investment by using a discount rate and series of future payments and
income.
In financial modeling, the NPV function is useful in determining the value of an
investment or understanding the feasibility of a project. It should be noted
that it’s better for analysts to use the XNPV function instead of the
regular NPV function.
Formula
=NPV(rate,value1,[value2],…)
The NPV function uses the following arguments:
1. Rate (required argument) – It is the rate of discount over the length of the
period.
2. Value1, Value2 – Value1 is required option. They are numeric values that
represent series of payments and income where:
• Negative payments represent outgoing payments.
• Positive payments represent incoming payments.
The NPV function uses the following equation to calculate the Net Present
Value of an Investment:
How to use the NPV Function in Excel?
To understand the uses of the function, let’s consider a few examples:
corporatefinanceinstitute.com
64