Table of Contents
Summary
The Excel NPV function calculates the net present value of an investment based upon a discount rate and a series of cashflows. The higher the NPV result the better the investment is believed to be. Negative NPV results indicate poor investments that should be avoided. The NPV function is an Excel financial function.
Function
=NPV(rate, value1, [value2], [value3], …)
Arguments (inputs)
rate = the discount rate for a single period
value1 = the payments/investments (expressed as negative cashflow) and returns/income (expressed as positive cashflow) distributed equally over the entire period, can be a specific value, cell reference, or range reference
value2/3/… = [optional] the payments/investments (expressed as negative cashflow) and returns/income (expressed as positive cashflow) distributed equally over the entire period, can be a specific value, cell reference, or range reference
Note: The rate should be the discount rate between a single period. E.g., if the values are expressed in annual increments between values, the rate should be an annual rate.
Return value
The NPV function returns the net present value for an investment with a provided discount rate and a series of investments and returns (or payments and income). The higher the NPV return value, the better the investment is believed to be.
For example, an investment with an NPV of $5,000 is a better investment than an investment with an NPV of $3,000.
Excel NPV function example
In the example above the NPV function calculates the net present value for an investment of $5000 in 2020 (cell C8), that will result in a series of returns or payments shown in cells C9:C18. The discount rate used in this example is 2.5% as shown in cell C5.
=NPV(C5, C8:C18)
The result returned is $498.28, which is the net present value for this investment.
