Syntax
NPV(rate, value1, [value2, ...])
| Parameter | Description |
|---|---|
| rate | Parameter of the NPV function. |
| value1 | Parameter of the NPV function. |
| [value2 | (Optional.) Parameter of the NPV function. |
| ...] | Parameter of the NPV function. |
Examples
Simple project evaluation
Formula
=NPV(0.10, -50000, 15000, 18000, 20000, 22000)
$8,272.49. A project costing $50K upfront and returning $15K-$22K over 4 years has a positive NPV at 10% — it's worth pursuing.
Investment with initial outlay (correct method)
Formula
=-100000 + NPV(0.08, 30000, 35000, 40000, 45000)
$21,557.14. The initial investment happens at time 0, so add it outside of NPV. Future cash flows are discounted at 8%.
Comparing two projects
Formula
=NPV(0.12, -20000, 8000, 8000, 8000)
-$780.60. Negative NPV at 12% — this project doesn't meet the required return threshold.
Common Errors
#VALUE!
One of the cash flow values is non-numeric text.
#NUM!
The rate equals -1, which would cause division by zero in the discount calculation.
Tips
Time-zero cost goes outside NPV
NPV assumes the first cash flow occurs at end of period 1. If you have an upfront cost at time 0, add it separately: =-InitialCost + NPV(rate, future_flows).
NPV vs IRR
NPV gives you a dollar value; IRR gives you a percentage. Use NPV when comparing projects of different sizes, since a larger project may have a lower IRR but higher NPV.
Sensitivity testing
Try multiple discount rates (8%, 10%, 12%) to see how sensitive the project's value is to your cost of capital assumption.
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