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NPV Function

Excel 2007+

Summary

The Excel NPV function calculates the net present value of an investment based on a discount rate and a sequence of future cash flows. It discounts future payments (negative values) and income (positive values) to their present value, helping determine investment profitability.

Syntax

NPV(rate,value1,[value2],...)

Parameters

Parameter	Type	Required	Description
rate	`Number`	Yes	The discount rate over the length of one period
value1	`Number`	Yes	First payment or income occurring at end of first period
value2,...	`Number`	No	Additional payments/income at end of subsequent periods (1-254 total values)

Using the NPV Function

NPV is crucial for financial analysis, enabling you to assess whether an investment generates value by comparing the present value of cash inflows to outflows. Use negative values for investments/outflows and positive values for returns.

Common NPV Examples

Basic Investment Evaluation

=NPV(0.1,-10000,3000,4200,6800)

Calculates NPV for 10% discount rate with $10K initial investment and three years of returns. Result: $1,188.44

Initial Investment at Period Start

=NPV(0.08,-40000,8000,9200,10000,12000,14500)+(-40000)

Adds initial investment (period 0) separately since NPV assumes first value is end of period 1. Result: $1,922.06

Project with Final Loss

=NPV(0.08,-40000,8000,9200,10000,12000,14500,-9000)+(-40000)

Investment with sixth-year loss of $9,000. Result: ($3,749.47) indicating unprofitable.

Frequently Asked Questions

NPV assumes the first cash flow (value1) occurs at the END of period 1. Initial investments at period 0 start must be added separately.

NPV assumes regular periods; XNPV handles irregular dates. Use XNPV for non-periodic cash flows.

Yes, NPV processes only numeric values in arrays/ranges, ignoring text, blanks, and errors.

Common Errors and Solutions

#VALUE!

Cause: Non-numeric rate or cash flow values

Solution: Ensure all arguments contain valid numbers

#NUM!

Cause: Invalid discount rate (negative periods)

Solution: Verify rate represents valid periodic discount

Incorrect results

Cause: Including period 0 cash flow in NPV arguments

Solution: Add initial investment separately: NPV(values)+initial_investment

Notes

Cash flows must represent end-of-period values
Order matters: NPV uses sequence position for timing
Empty cells, text, and errors in ranges are ignored
For beginning-of-period cash flows, multiply result by (1+rate) or adjust manually
NPV(IRR(values), values) = 0 by definition

Compatibility

Available in: Excel 2007, Excel 2010, Excel 2013, Excel 2016, Excel 2019, Excel 2021, Microsoft 365

Not available in:

Content last reviewed: December 9, 2025
Update frequency: As needed
Excel versions tested: Excel 2007+