MS Excel: How to use the NPV Function
This Excel tutorial explains how to use the Excel NPV function with syntax and
examples.
Description
The Microsoft Excel NPV function returns the net present value of an investment.
The NPV function is a built-in function in Excel that is categorized as a Financial
Function. It can be used as a worksheet function (WS) and a VBA function (VBA) in
Excel. As a worksheet function, the NPV function can be entered as part of a formula in
a cell of a worksheet. As a VBA function, you can use this function in macro code that is
entered through the Microsoft Visual Basic Editor.
Syntax
The syntax for the NPV function in Microsoft Excel is:
NPV( discount_rate, value1, [value2, ... value_n] )
Parameters or Arguments
discount_rate
The discount rate for the period.
value1, value2, ... value_n
The future payments and income for the investment (ie: cash flows). There can
be up to 29 values entered.
Returns
The NPV function returns a numeric value.
Note
Microsoft Excel's NPV function does not account for the intial cash outlay, or may
account for it improperly depending on the version of Excel. However, there is a
workaround.
This workaround requires that you NOT include the initial investment in the future
payments/income for the investment (ie: value1, value2, ... value_n), but instead, you
need to subtract from the result of the NPV function, the amount of the initial
investment.
The workaround formula is also different depending on whether the cash flows occur at
the end of the period (EOP) or at the beginning of the period (BOP).
If the cash flows occur at the end of the period (EOP), you would use the following
formula:
=NPV( discount_rate, value1, value2, ... value_n ) - Initial
Investment
If the cash flows occur at the beginning of the period (BOP), ou would use the following
formula:
=NPV( discount_rate, value2, ... value_n ) - Initial Investment +
value1
Applies To
Excel for Office 365, Excel 2019, Excel 2016, Excel 2013, Excel 2011 for Mac,
Excel 2010, Excel 2007, Excel 2003, Excel XP, Excel 2000
Type of Function
Worksheet function (WS)
VBA function (VBA)
Example (as Worksheet Function)
Let's look at some NPV examples and explore how to use the NPV function as a
worksheet function in Microsoft Excel:
This first example returns a net present value of $3,457.19. It assumes that you pay
$7,500 as an initial investment . You then receive the following income for the first four
years (EOP): $3,000, $5,000, $1,200, and $4,000. An annual discount rate of 8% is
used.
=NPV(8%, 3000, 5000, 1200, 4000) - 7500
This next example returns a net present value of $8,660.77. It assumes that you pay
$10,000 as an initial investment. You then receive the following income for the first three
years (BOP): $3,400, $6,500, and $10,000. An annual discount rate of 5% is used.
=NPV(5%, 6500, 10000) - 10000 + 3400
Example (as VBA Function)
The NPV function can also be used in VBA code.
Let's look at some Excel NPV function examples and explore how to use the NPV
function in Excel VBA code:
This example returns a net present value of $3,457.19. It assumes that you pay $7,500
as an initial investment . You then receive the following income for the first four years
(EOP): $3,000, $5,000, $1,200, and $4,000. An annual discount rate of 8% is used.
The VBA code would be:
Dim LNumber As Double
Static Values(4) As Double
Values(0) = 3000
Values(1) = 5000
Values(2) = 1200
Values(3) = 4000
LNumber = Npv(0.08, Values()) - 7500
