Calculate Net Present Value To Decide Between Two Projects In Excel - NPV Function

We cover how to calculate the net present value in order to decide between two projects in excel. Net present value is underpinned by the fact that £1 now is worth more than £1 in the future. One reason is because inflation erodes the value of money. Moreover, by investing £1 in a project, this leaves you with £1 less to invest in other alternative investments; which is known as the opportunity cost of capital. To account for the time value of money, the NPV formula uses a discount rate which can be calculated in several ways. In practice, a company may calculate this discount rate using the expected return of other projects with a similar riskiness.

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Overview: (0:00)
NPV Function: (0:51)
Decide Using NPV: (2:13)
How It Works: (2:27)