CFI-Excel-eBook

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The Corporate Finance Institute ExcelXNPVGet the Net Present Value (NPV) for a seriesof cash flows that may not be periodicrate values datesWhy use the XNPV Function in Excel?The XNPV function in Excel uses specific dates that correspond to each cashflow being discounted in the series, whereas the regular NPV functionautomatically assumes all the time periods are equal. For this reason, theXNPV function is far more precise and should be used instead of the regularNPV function.More learning: read CFI’s list of top Excel formulas.corporatefinanceinstitute.com78
The Corporate Finance Institute ExcelWhat is the XNPV formula?The XNPV formula is Excel requires the user to select a discount rate, a seriesof cash flows, and a series of corresponding dates for each cash flow.The Excel formula for XNPV is:=XNPV(Rate, Cash Flows, Dates of Cash Flow)The XNPV function uses the following three components:1. Rate – The discount rate to be used over the length of the period (seehurdle rate and WACC articles to learn about what rate to use).2. Values (Cash Flows) – This is an array of numeric values that represent thepayments and income where:• Negative values are treated as outgoing payments (negative cashflow).• Positive values are treated as income (positive cash flow).3. Dates (of Cash Flows) – It is an array of dates corresponding to an array ofpayments. The date array should be of the same length as the values array.The function uses the following equation to calculate the Net Present Value ofan investment:Where:d i = the i‘th payment dated 1 = the 0’th payment dateP i = the i‘th paymentPlease see the example below for a detailed breakdown of how to use XNPV inExcel.corporatefinanceinstitute.com79
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