NPV Formula in Excel

This article outlines everything you need to know about NPV in Excel.

About the NPV formula in Excel

The NPV formula in Excel, is a way of calculating the Net Present Value (“NPV”) of a series of cash flows based on a specified discount rate. Visit this page to visualize the process.

The formula works by first selecting a discount rate, and then selecting a continuous series of cash flows.

The NPV function can be very useful for financial analysis and financial modeling when determining the value of an investment (a company, a project, a cost saving initiative, etc.).

In your financial model, you can follow the stops below to properly link up the NPV function.

Download the Free Excel Template – NPV Function

How to link the NPV formula

=NPV(discount rate, series of cash flow)

(See screenshots below)

Example of the NPV function

Step 1: Set a discount rate in a cell.

Step 2: Establish a series of cash flows (must be in consecutive cells).

Step 3: Type “=NPV(“  and select the discount rate “,” then select the cash flow cells and “)”.

Congratulations, you have now calculated the NPV in Excel!

Download the free template.

 

What is the math behind the NPV formula?

Here is the mathematical formula for calculating the present value of an individual cash flow.

Where,

PV = Present Value
F = Future payment (cash flow)
r = Discount rate
n = the number of periods in the future the cash flow is