NPV
The XNPV function returns the net present value of an investment for regular cash flows.
This is an important tool for evaluating investment decisions and financial analysis.
Syntax
NPV(discount, cashflow1, [cashflow2, ...])
| Argument | Description | Permitted values |
|---|---|---|
| discount | Discount rate for one period | Decimal number (for example, 0.05 for 5%) or a reference to a number |
| cashflow1 | Income or payments on investments | Any numerical value or reference to a number |
| [cashflow2, ...] | (optional) Additional cash flows | Any numerical value or reference to a number |
Example of use
Suppose you have a discount rate of 10% and cash flows in cells A1, A2, and A3:
=NPV(0.1, A1, A2, A3)
This formula will calculate the net present value of cash flows at a rate of 10%.
Notes
- The NPV function only considers future cash flows.
If you have an initial investment (for example, in cell A0), you must subtract it from the result: =NPV(0.1, A1:A3)-A0. - Make sure that cash flows represent positive and negative values, where positive values are income and negative values are expenses.
- The NPV function assumes that cash flows occur at equal intervals (regular periods).
- The first cash flow is usually the initial investment and is indicated as a negative number.
- If the result of NPV > 0, the project is considered profitable; if NPV < 0, it is considered unprofitable.
- For irregular cash flows, use the XNPV function.