Computing the NPV

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In many investment choices, people often have to select projects to invest in and choosing the best one has to base on some common sense measure that is understood widely. Net Present Value, or NPV is basically all cash flows (negative = cash outflow/investment, positive= cash inflow) taken at the current time period.

With MS Excel, it’s increasingly easy to calculate this measure, but many people mess it up the first time they use MS Excel NPV formula. Contrary to what one would expect, NPV formula doesn’t take into account the negative cash investment at the beginning of timeperiod. So for the NPV formula to work out well, you need to simply add up the current cash outflow/investment needed figure to the NPV result.

Have a look at the attached Excel sheet for your reference (Just click the picture below to access the MS Excel sheet).

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