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Excel how-to guide
How to npv investment value in Excel
Evaluate whether a project or investment generates more value than its cost when future cash flows are adjusted for the time value of money.
Step-by-step instructions
How to npv investment value — 3 steps
1
Enter the discount rate (cost of capital or hurdle rate) as the first argument.
2
List the future cash flows in chronological order in a range — NPV assumes the first value occurs at the end of period 1, not today.
3
Add the initial investment (a negative number in B2) outside the NPV function because it occurs today (period 0), not at the end of period 1.
Example data
Worked example
| Parameter | Value |
|---|---|
| Discount Rate | 10% |
| Initial Investment | -50000 |
| Year 1 Cash Flow | 15000 |
| Year 2 Cash Flow | 18000 |
| Year 3 Cash Flow | 20000 |
| Year 4 Cash Flow | 22000 |
| Year 5 Cash Flow | 25000 |
Common mistakes
Errors to watch out for
Initial investment included inside NPV
NPV discounts the first cash flow to period 1. If you include the upfront investment inside the range, it will be discounted incorrectly. Add it outside the function as a separate term.
Rate as a percentage instead of decimal
Enter the rate as a decimal (0.10) or a cell reference to a percentage-formatted cell. Typing 10 instead of 10% or 0.10 will give a dramatically wrong result.
FAQ
Frequently asked questions
What does a positive NPV mean?
A positive NPV means the investment creates value — the discounted future cash flows exceed the initial cost. A negative NPV means the investment destroys value at the given discount rate.
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