Returns the net present value of a series of future receipts at a fixed periodic interest rate.
Syntax:
NPV(interest:number, range)
interest | is the interest rate, |
range | is the range of cells containing the amounts of the receipts |
It is assumed that the receipts are at equal intervals and take place at the end of the period.
The following formula is used to calculate net present value:
net present value =
Σi=n
( vi ÷ (1 + interest)i )
where i is the current iteration,
n is the number of cash flows (i.e. the number of elements in the range) and
v is the value of the current iteration:
Example:
Cells B10
to B14
each contain £120. Given an interest rate of 10% then the formula
NPV(0.10, B10:B14)
returns the number 500.38
(pounds), the present value of the future receipts.