The net present value (NPV) is equal to the present value of an investment’s cash inflows minus the present value of its cash outflows. It is a measure of how much value you create when undertaking an investment. NPV is generally used in capital budgeting to determine the viability of new projects.
In Microsoft Excel, we can rely on two functions to estimate the project’s net present value—NPV and XNPV functions. The NPV calculates the investment’s net present value by using a discount rate and a series of periodic future payments. Whereas, the XNPV is a more versatile function that estimates the net present value for a schedule of cash flows, which aren’t necessarily periodic. It gives you the flexibility to assign specific dates to each cash flow, making it suitable for cash flow series that occur at irregular intervals. You can use it to determine the profitability you derive from a project.
This open-access Excel template is a useful tool for bankers, investment professionals, corporate finance practitioners, portfolio managers, and anyone preparing a corporate presentation.
Net Present Value (NPV) is among the topics included in the Corporate Finance module of the CFA Level 1 Curriculum. Gain valuable insights into the subject with our Corporate Finance course.
You can also explore other related templates such as—Present Value (PV) and Internal Rate of Return (IRR).