Not sure which of these videos to watch? Try out our 'Which Excel Formula to Use' App to get guidance. NOTE: All these free Excel video tutorials are streamed via YouTube. If your network does not allow YouTube videos, you can access the video via your smartphone or from a different network.
How to use the NPV in Excel to determine the Net Present Value or a series of cash flows
This segment will show you how to determine the NET PRESENT VALUE (NPV) in Excel of a series of cash flows.
In this example we have a series of cash flows starting at the beginning of Period 1, which we called Period 0. An outflow of 20 000, and then the next five years we have inflows of cash.
We would like to determine what the NET PRESENT VALUE is of these series of cash flows. In order to do this we can make use of the NET PRESENT VALUE function.
Now this is very, very important because if you look at our numbers, Period 0 is actually the beginning of Period 1 and then Period 1 that’s the end, the end, the end.
If we assume the values of all these cells we’ll be incorrect because Excel will assume that this 20 000 investment actually occurs at the end of Period 1. So in order to do this is our Value 1
However we have to be very careful because what we’ve told it to do, is give us the NET PRESENT VALUE of all the cash flows at the end of the years. We have excluded this, now because it happens at the beginning of Period 1 we don’t have to worry about present valuing it because the number is already present values.
So in order to get an accurate NET PRESENT VALUE, you need to subtract the initial investment.
so the NET PRESENT VALUE of these series of cash flows is actually this number here.
Excel Relevance- Is the spreadsheet still relevant Below an interesting video clip on whether Excel is still relevant. From our perspective, despite all the software that has come out to ‘replace’ Excel, it is still the dominant piece of business … Continue reading
EPL Spreadsheet For some fun and to learn a bit about the Excel environment worldwide, we are developing an EPL spreadsheet to allow players to set up a sweepstakes or office pool based on the English Premier League. We are … Continue reading
Just a quick note to say your blog is brilliant. Full of useful bits of info. After your courses, I am by far the best modeller in our office, and we regularly get comments from our business partners on the quality of our models. Thanks for all the help,– Mike