Excel Function - NPV

Used to calculate the Net Present Value of a series of future cash flows.

=NPV(rate, value1, [value2], ...)

Where:

• rate: the discount rate (or required rate of return) per period
• value 1, value2, ...: the future cash flows occurring at the end of each period starting at period 1

IMPORTANT If you have a cash flow that occurs today (Time 0), you must add it separately, it is not included in the NPV function because Excel assumes all listed values occur in the future.

Example

Suppose you have an initial investment of -$1000today,andexpecttoreceive$400, $500,and$600 over the next three years, with a discount rate of 10%:

=NPV(10%, 400,500,600) + (-1000)

Would yield the investment’s total net present value.