The NPV function
Returns the net present value of future cash flows at a discount rate. The first value is discounted one period, so a payment made today is added outside NPV.
Syntax
NPV(rate, value1, [value2], ...)- rate
- The discount rate per period.
- value1
- The cash flows, one per period from period 1, as numbers, cells or a range.
- value2 (optional)
- More cash flows.
Examples
F1=NPV(D1,B2:B4)+B1
| A | B | C | D | E | F | |
|---|---|---|---|---|---|---|
| 1 | Year 0 | -1000 | 0.08 | 30.838795 | ||
| 2 | Year 1 | 400 | ||||
| 3 | Year 2 | 400 | ||||
| 4 | Year 3 | 400 |
B1
=NPV(10.1,2110,3121)| A | B | |
|---|---|---|
| 1 | 200 |
In plain words: What 2110 next year and 3121 the year after are worth today at 1a 10% discount rate.
Practice NPV
Questions
Why is my NPV wrong by a year?
NPV discounts the first value one period, as if it were paid a year from now. Leave the investment you pay today out of the range and add it on after, like NPV(rate,B2:B6)+B1.
What does a positive NPV mean?
The cash flows are worth more than the investment at that discount rate, so the project earns more than the rate you require.