Content

• Steps
• Advice
• Warning

This article shows you how to calculate the Net Present Value (NPV) of an investment by using Microsoft Excel. You can do this using Excel on Windows and Mac computers.

Steps

1. 

   Make sure you have your investment information available. To calculate the NPV, you need to know the annual discount rate (such as 1%), the initial investment, and the return for at least one year.
   • It is better if you have an investment return of 3 years or more, but this information is not required.

2. 

   
   
   Open Microsoft Excel. This is a program that has a green box icon with a white "X".

3. 

   Click Blank workbook (New sheet). You will find this option in the upper left corner of the Excel window.

4. 

   
   
   Enter the discount rate for the investment. Please select a cell (for example A2), and then enter the decimal that corresponds to the annual discount rate for the investment.
   • For example, if the discount rate is 1%, you would enter 0.01 here.

5. 

   
   
   Enter your initial investment. You click an empty cell (for example A3) and enter the initial amount that was used to invest.

6. 

   Enter the profit for each year. Click on another blank cell (for example A4), then enter the first year's profit and add the profit you would make for the following years.

7. 

   Select a cell. Click the cell you want to use to calculate the NPV.

8. 

   Enter the formula for NPV calculation. You will enter = NPV () here. Information for the investment is entered in parentheses.

9. 

   Add values ​​to the NPV formula. Inside the parentheses, you need to enter the number of the cell containing the discount rate, investment, and at least a profit.
   • For example, if the cell A2 is the discount rate, cell A3 is the investment and the umbrella A4 as profit, your formula will be = NPV (A2, A3, A4).

10. 

    Press ↵ Enter. This is an operation that tells Excel to calculate the NPV and display the result in the selected cell.
    • If the NPV shows a red number, the investment is negative.
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Advice

• You can use NPV to predict your future investment, if you are confident with current returns.

Warning

• If there are no profits for at least a year, you cannot calculate NPV.