In this article, we will learn How to get a Net Present Value Calculator in Microsoft Excel 2010.
Net Present value
The Net Present Value (NPV) returns the net present value of an investment based on periodic, constant payments and a constant interest rate.
Net present value is calculated using a discount rate (which may represent an interest rate or the rate of inflation) and a series of future payments (negative values) and income (positive values).
NPV function Syntax :
|=NPV (rate, value1, value2, ….)|
Rate is the periodic discount rate over the length of the project
Value1, Value2, ……..Value n will be the value of the specific period on which calculation is based.
Value1 and Value2 are 1 to 29 arguments representing the payments and income. These value sets must be equally spaced in time and occur at the end of each period.
Let us understand more with an example:
Let’s use it in an example to understand it.
Here one amount is debited and other amounts are credited at an interest of 10%.
Use the formula in D3 cell.
It means the net present value of the whole expense is $789.
This amount is to be debit.
Let us consider another example we have invested $100,000 in a machine.The additional cash inflows (net income + depreciation) from the machine will be $55,000, $ 65,000, and $80,000 over the next three years. Interest Rate is 6%. We want to calculate the Net Present Value (NPV)
Let us take another example
Here are some observational notes shown below.
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