Quick Answer

NPV Function

Finds the present value of future cash flows minus the initial investment.

Syntax

NPV

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

Parameters

Parameter	Description	Required
rate	The discount rate per period.	Required
value1	The first future cash flow (must occur at the end of the first period).	Required
value2	Additional future cash flows (optional).	Optional

Basic Example

NPV of an investment with initial outlay and future returns

=NPV(0.1, 10000, 12000, 15000) + (-20000)

ResultNet present value

Discounts the future cash flows at 10% and then subtracts the initial $20,000 investment.

Advanced Examples

Example 1: NPV with a range

Project evaluation

Calculate NPV using a range of cash flows

=NPV(0.08, B2:B5) + B1

Result: Project NPV

B1 contains the initial investment (negative) and B2:B5 contain future cash flows.

How NPV Works

NPV discounts each future cash flow back to its present value using the discount rate, then sums them. The initial investment is not included in the NPV argument list and must be added separately, typically as a negative value.

1

Enter discount rate

Type the rate per period, e.g. 0.1 for 10%.

2

List future cash flows

Enter the cash flows that occur at the end of each period.

3

Add initial investment

Add the initial outlay as a negative number outside the NPV function.

Important Notes & Limitations

Assumes cash flows occur at the end of each period and are equally spaced.
Does not include the initial investment in the cash-flow list.
For irregular cash-flow intervals, use XNPV.

Common Errors & Fixes

Wrong NPVInitial investment was included inside NPV instead of added outside.

Fix: Add the initial investment separately: =NPV(rate, cashflows) + initial_investment.

Negative NPV confusionCash flow signs are incorrect.

Fix: Use positive for inflows and negative for outflows.

Download Practice File

Practice NPV with Real Data

Download a sample CSV file with pre-populated data and practice exercises for the NPV function. Works in both Excel and Google Sheets.

Works in Google SheetsCompatible with ExcelIncludes exercises

File format: CSV (comma-separated values) - opens in Excel, Google Sheets, and all spreadsheet apps

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Frequently Asked Questions

What is the difference between NPV and XNPV?

NPV assumes equal-period cash flows. XNPV uses specific dates for irregular intervals.

Should I include the initial investment in NPV?

No, add it outside the NPV formula as a negative value.

What does a positive NPV mean?

The investment is expected to add value and should be accepted if other factors are equal.