As Timothy R. Mayes, author of Financial Analysis with Microsoft Excel, says on his website TVMCalcs.com: Net present value is defined as the present value of the expected future cash flows less the initial cost of the investment…the NPV function in spreadsheets doesn’t really calculate NPV. Instead, despite the word “net,” the NPV function is really just a present value of an uneven cash flow function. One simple approach is to exclude the initial investment from the values argument and instead subtract the amount outside the NPV function. In the example shown, the formula in F6 is: Note the initial investment in C5 is not included as a value, and is instead added to the result of NPV (since the number is negative).
Notes
values must be equally spaced in time and occur at the end of each period. values must be in chronological order.
Dave Bruns
Hi - I’m Dave Bruns, and I run Exceljet with my wife, Lisa. Our goal is to help you work faster in Excel. We create short videos, and clear examples of formulas, functions, pivot tables, conditional formatting, and charts.
