How to Calculate Net Present Value (Npv) in Excel

In this tutorial, you will learn to calculate Net Present Value, or NPV, in Excel.

In this tutorial, you will learn to calculate Net Present Value, or NPV, in Excel. Net Present Value is a financial function that is calculated for an investment, and it represents the present value of the investment minus the amount of money that costs to buy in. Excel offers a preset function for this called NPV. Please be aware that all the investment cash flows must occur at the same interval for the calculation to be accurate.

NPV has two arguments: rate -- which refers to the discount rate, and the range of values that contains future cash flows.

Step 1: Open the document in which you want to calculate NPV.

Step 2. Go to the cell where you want the function to be calculated, and type the following:

= npv (our discount rate /12 as the rate is compounded monthly, the range of values you want to be considered)+the initial investment, in our case the starting 100,000$.

Step 3. Excel will calculate for you the Net Present Value of this investment.

Step 4. Go to the cell that you want to hold the NPV result for comparison, and type:

=npv(the same discount rate/12,the range of values)+the initial investment. Hit Enter.

Step 5. Excel will calculate for you the Net Present Value of this investment.

Step 6. Now that we see both results, we will agree that the first option is better and proceed with it.

Result: Congratulations, you have learned how to calculate the Net Present Value in Excel.

[howtechoffice]

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[EzeAsuoha]

Thx for this. Also if ur doing yearly stuff then dont put the divide by 12 part

[cr]

this 2013 video still save my life at 2021

[KarinaK]

Omg, thank you. I was including the initial investment as part of the values. Why doesn't excel do this? It's much more intuitive to include it as part of the values (as negative cash flow) than add it at the end of the formula. So freaking weird.

[myofficetop]

This is much better than some Indian youtuber explanations.

[dembh]

It seems wrong. To calculate the PV of the $25, 000, we compute PV of an Annuity.



$25, 000/0.07 * ( 1 - [ 1 / (1.07^5) ] ) which is = $102, 504.9359 and then subtract the initial investment of -$100, 000; total NPV = $2, 504.94

[nurshahirahrahim]

mind asking, why does the 7% discount rate need to be divided by 12?

[Artemisiocdo]

by the way. the two investments should have the same life. To evaluate two investments that have different life is used a method called replacement chain.

[AungMyoMyint]

Do we still not to be divided by 12 if cash flow is based on annually instead of monthly?

[symbianwater]

Be sure to add a few more seconds to your videos as your good content is blocked by "next video" options from youtube.

[TimeManInJail]

does this work with values that are not the same? instead of 25k each follow year

[michaelleahy]

Love the background music, where can I download the sound FXs?

[csichristian]

I did What u did in the video and I got the same npv but +$200k? So:
222 841, 93 and 222 416, 13???

[IsaacHite]

the end card thing sucks make the time shorter its covering half the screen.

[User-eqzi]

ia int mins the intial investment (cost)

[kencwing]

Why dont need to minus Initial Investment
? THE EXCEL SHOW THAT YOUR NPV IS ADD Initial Investment
i

[kimjuanto]

Rate is wrong tho, you can't just divide by 12.

[lbisthebestband]

You just copied this video from LinkedIn Learning Solutions, and you're both wrong... You do not divide the interest rate by 12. Watch any other video, use a financial calculator, or calculate each year's present value manually and then subtract the initial investment to see you are just wrong...

[andrewgove]

This is wrong! NPV is 2500. Do not follow this tutorial!

[sr]

stupid annoying music in the background. How dumb!