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The Corporate Finance Institute ExcelNPVGet the Net Present Value (NPV) for periodiccash flowsrate value1 value2yWhat is the NPV Function?The NPV Function is categorized under Financial functions. It will calculate theNet Present Value (NPV) for periodic cash flows. The NPV will be calculated foran investment by using a discount rate and series of future payments andincome.In financial modeling, the NPV function is useful in determining the value of aninvestment or understanding the feasibility of a project. It should be notedthat it’s better for analysts to use the XNPV function instead of theregular 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 theperiod.2. Value1, Value2 – Value1 is required option. They are numeric values thatrepresent 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 PresentValue 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.com64
The Corporate Finance InstituteExcelExample 1Suppose we are given the following data on cash inflows and outflows:The required rate of return is 10%. To calculate the NPV, we will use theformula below:corporatefinanceinstitute.com65
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