Using Excel to calculate NPV

By Nick Crawley on August 12 2009

One of the most common questions I am asked in forums which I contribute to, am emailed about, quizzed in conferences and when speaking to training course participants is regarding the risks involved in calculating an NPV using Excel and my preferred calculation method (which is from first principles, easy answer!)

Calculating NPV in Excel is not always easy

There is a lot of information and opinions readily available on the web regarding this calculation - which is not always a good thing! For such a simple formula this causes so much discussion, confusion, error and probably frustration too! I would much prefer to discuss e ^ (i*pi) +1 = 0 but I am guessing you are not so interested in that one today! In fact if you try and understand it fully I promise you will leave the world of finance for something much more interesting!

Financial modelling tutorial on NPV calculations in Excel

We have recently prepared a FREE Tutorial on calculating the NPV in Excel, the different ways of doing so and the considerations you should have. It is written so that if you are in a hurry and don’t want to farm the web on this matter then it should be an efficient and your last stop on the subject matter.

Remember that the NPV is a relatively simple concept only once removed from summing the cashflows so if your NPV does not ‘feel’ right or it behaves unusually in scenarios then it probably is wrong…firstly investigate your formulation NPV and compare to the turorial and then check the underlying contributing cashflows.

Read the tutorial on calculating NPV in Excel

Comments

In doing such calculations,

Submitted by ExcelT8 on Fri, 11/06/2010 - 11:00.

In doing such calculations, we can really rely on Excel.. But as what you said, it is not always easy which is true. And the tutorial that you have given is very easy to understand and well-worded. excel development