NPV Formula

To calculate Net Present Value using the NPV formula in Excel, you need a series of periodic cash flows like that shown in the figure below.

NPV Calculation
The NPV can then be calculated using the following formula:

=NPV(rate,values_t1_to_t4)+value_t0
=NPV(D2,B3:B6)+B2

The Excel NPV formula only calculates the sum of the present value of future cash flows (t=1, t=2, ... t=n), so to obtain the true Net Present Value, you need to subtract the initial investment or in other words, add the initial negative value at t=0.

The NPV formula requires periodic cash flows. If you have non-periodic cash flows, you can use the XNPV formula.

Download an NPV Calculator for Excel.
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http://www.ehow.com/members/stevemar2-articles.html said...

Nice explanation of a tricky concept. I have an eHow article that also explains how to use the NPV function in Microsoft Excel. Check it out at:
http://www.ehow.com/how_5174941_use-npv-function-microsoft-excel.html

5:29 AM

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