NPV Google Sheet Formula
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NPV Formula Syntax
Example Use Case
Calculating the net present value of an investment based on a series of cash flows
Understanding the NPV Formula
The NPV function in Excel calculates the net present value of an investment based on a discount rate and a series of future cash flows. It's an investment analysis tool for determining present-day worth—like evaluating whether a project or investment will be profitable.
NPV(0.1, 10000, 15000, 20000, 25000, 30000) calculates the net present value of five annual cash flows using a 10% annual discount rate. It takes rate and value1 through value254 arguments, discounting future values to present day—perfect for capital budgeting or investment analysis.
Why Use NPV?
NPV values future cash flows—think investment comparison or project evaluation. Its time-adjusted valuation accounts for the time value of money, making it an essential tool for financial decisions where timing of cash flows matters as much as their amount.
Example with Sample Data
| Parameters | Formula | Result |
|---|---|---|
| Rate: 10% Cash Flows: $10,000, $15,000, $20,000, $25,000, $30,000 | =NPV(0.1, 10000, 15000, 20000, 25000, 30000) | $76,299.49 |
| Rate: 10% Initial Investment: -$50,000 Cash Flows: $15,000, $20,000, $25,000, $30,000 | =NPV(0.1, 15000, 20000, 25000, 30000) - 50000 | $17,563.17 |
| Rate: 15% Cash Flows: $10,000, $15,000, $20,000, $25,000, $30,000 | =NPV(0.15, 10000, 15000, 20000, 25000, 30000) | $65,107.15 |
NPV discounts future value: $76,299.49 present value at 10% discount rate, dropping to $65,107.15 at 15% rate. A positive NPV indicates a potentially profitable investment. It's a time-value calculator.
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