NPV function: Description, Usage, Syntax, Examples and Explanation

Syntax of NPV function

NPV(rate,value1,[value2],…)

The NPV function syntax has the following arguments:

• Rate: The rate of discount over the length of one period.
• Value1, value2, …    Value1 is required, subsequent values are optional. 1 to 254 arguments representing the payments and income.
  • Value1, value2, … must be equally spaced in time and occur at the end of each period.
  • NPV uses the order of value1, value2, … to interpret the order of cash flows. Be sure to enter your payment and income values in the correct sequence.
  • Arguments that are empty cells, logical values, or text representations of numbers, error values, or text that cannot be translated into numbers are ignored.
  • If an argument is an array or reference, only numbers in that array or reference are counted. Empty cells, logical values, text, or error values in the array or reference are ignored.

NPV formula explanation

• The NPV investment begins one period before the date of the value1 cash flow and ends with the last cash flow in the list. The NPV calculation is based on future cash flows. If your first cash flow occurs at the beginning of the first period, the first value must be added to the NPV result, not included in the values arguments. For more information, see the examples below.
• If n is the number of cash flows in the list of values, the formula for NPV is:
• NPV is similar to the PV function (present value). The primary difference between PV and NPV is that PV allows cash flows to begin either at the end or at the beginning of the period. Unlike the variable NPV cash flow values, PV cash flows must be constant throughout the investment. For information about annuities and financial functions, see PV.
• NPV is also related to the IRR function (internal rate of return). IRR is the rate for which NPV equals zero: NPV(IRR(…), …) = 0.

Example of NPV function

Steps to follow:

1. Open a new Excel worksheet.

2. Copy data in the following table below and paste it in cell A1

Note: For formulas to show results, select them, press F2 key on your keyboard and then press Enter.

You can adjust the column widths to see all the data, if need be.

Example 1

Example 2

For more information about annuity functions, visit:

• How to calculate Net Present Value (NPV)
• PMT, RATE, NPER, PV and FV Calculations
• Calculate payment periods for loan
• Calculate interest rate for loan
• Calculate periods for annuity