# Excel NPV Function to calculate Net Present Value

This Excel tutorial explains how to calculate net present value using Excel NPV Function.

You may also want to read:

Excel VBA NPV Function

## Net Present Value

Net Present Value is to calculate the present value of future cash flow. For example, your client will give you \$10000 when the project completes after 1 year, assume there will be inflation, the future \$10000 will be less than the present \$10000. Assume the inflation is 4%, the present value of \$10000 is 10000/(1+4%) = 9615.384615    This calculation is just a simple maths, you don’t even need to memorize any formula.

If your company needs to invest \$9900 today in order to gain \$10000 after 1 year, then you should not take this project because \$9615 you will gain is less than \$9900 you invest today.

If you receive \$10000 after 1 year, and \$5000 in the second year, then

Net present value = \$10000/(1+4%) + \$5000/(1+4%)2

= 9615.38 + 4622.78

= 14238.17

## Excel NPV Function

Instead of calculating the Net Present Value manually, Excel NVP Function provides a quick way to calculate the Net Present Value.

#### Syntax of NPV Function

`NPV(rate,value1,[value2],...)`
 Rate Required. The rate of discount over the length of one period. Value1, value2, .. Value1 is required, subsequent values are optional. 1 to 254 arguments representing the payments and income.

#### Example

Using the above example, if the discount rate is 4%, while the cash flow return is \$10000 after the first year, \$5000 after the second year

 Formula Result =NPV(0.04,10000,5000) HK\$14,238.17

For the Value parameter, you can also input a Range. For example

## Outbound References

Manager@IBM
Wyman is human resources professional specialized in implementation of HR information system.

He is also a:
- Microsoft Most Valuable Professional (Excel)
- Microsoft Community Contributor
- Microsoft Office Specialist in Access / Excel
- Microsoft Specialist in MS Project
- Microsoft Technical Associate
- Microsoft Certified Professional
- IBM SPSS Specialist