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How to calculate NPV (Net Present Value) in Excel and Google Sheets
Topic:Finance basicsExcel & Google Sheets
=NPV(B2, C2:C6)✓
Verified example
Computed by a real spreadsheet engine on the sample data below.
| Discount Rate | Cash Flows |
| 0.1 | -1000 |
| 1 | 300 |
| 2 | 400 |
| 3 | 500 |
| 4 | 600 |
=NPV(B2, C2:C6)→0
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Step by step
- 1Enter your discount rate in a cell (e.g., B2).
- 2List all future cash flows in consecutive cells (e.g., C2:C6).
- 3Use the NPV function, referencing the discount rate and the range of cash flows.
Tips
- Ensure your cash flows start from the first period after the initial investment.
- Check for consistent time periods in your cash flow data.
- Remember NPV does not account for the initial investment cost directly; you may need to subtract it manually.
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Frequently asked
What is the difference between NPV and IRR?
NPV gives the net present value of a series of cash flows, while IRR calculates the discount rate that makes the NPV zero.
Can NPV be negative?
Yes, NPV can be negative, indicating that the present value of the expected cash flows is less than the initial investment.
How do I interpret the result of NPV?
A positive NPV suggests the investment is profitable, while a negative NPV indicates a loss.
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