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Financial
The Excel NPV function returns the net present value of a series of future cash flows discounted at a constant rate — the core metric for evaluating investments and projects.
Quick answer:
=NPV(10%, 4000, 5000, 6000) // PV of the future flows
Syntax
=NPV(rate, value1, [value2], …)
| Argument | Description | |
|---|---|---|
rate | Required | The discount rate per period. |
value1 | Required | The first future cash flow (one period from now). |
value2… | Optional | Additional cash flows, in order. |
How to use it
The classic trap: NPV assumes the FIRST value is one period in the future, so a today (time-0) outlay must sit OUTSIDE the function:
=-10000 + NPV(10%, 4000, 5000, 6000) // initial cost added separately
Don’t put the time-0 cash flow inside NPV — it would be over-discounted by one period. Keep it outside, or use XNPV with real dates.
Try it: interactive demo
Live demo
Change the inputs and watch the result update.
Result:
Practice workbook
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Frequently asked questions
Should the initial investment go inside NPV?
No — NPV discounts the first value by one period. Put a time-0 outlay outside: =-cost + NPV(rate, futureflows).
NPV vs XNPV?
NPV assumes equally spaced periods; XNPV takes actual dates for irregular timing.
What rate should I use?
Your cost of capital or required rate of return — it must match the cash-flow period.
What does a positive NPV mean?
The investment is expected to add value above the discount rate; negative means it destroys value.
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