# Net Present Value Calculator

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• January 4, 2022 Updated
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In financial, there are some standard value measurement that usually used to measure whether a new business or a new project is profitable or not. Some most common terms are ARR (Average Rate of Return), PP (Payback Period), IRR (Internal Rate of Return) and NPV (Net Present Value). All terms can be used at the same time and will also give you different result to value your investment. And this is the first tool of those four I created to help you calculate your investment profitability based on Net Present Value calculation, where it is defined as a difference between the present value of cash inflows and the present value of cash outflows.

I am not an expert in finance, but I know finance well because I am running several companies. I have some people who works for me to do all financial things where I have to use their financial reports when I made some business decisions.

You can use this NPV method if you positioned your self only as an investor that received a fixed amount of money in a short period. In my experiences, for a longer period of time, say more than 3 years, and with uncertain  business risks, you should make a detail financial plan to justify your business plan.

Microsoft Excel already provide a tool to calculate this NPV where you can use it directly. And in this spreadsheet, this calculation is used to compare three different projects or investments based on discount rate, period, initial cash flow and yearly cash flow. And as I mention above, it is suitable only for a business with minimum business risks.

If you are a student who want to learn the implementation of NPV method, you can play around with this spreadsheet or modify it to suit your purposes. And you can read also the explanation in the Excel Help menu. Or just googling this Net Present Value term, and you will get hundreds of sites that provide detail information about it.

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Hi friend,
Thank you for your great effort in providing free Excel templates to everyone.

I have reviewed your template about NPV calculation, but I have a concern whether your understanding of this formula was correct. (Sorry if I said something wrong).

As I knew, the NPV formula in Excel was different from the NPV in financial term.

The NPV formula helped to calculate PRESENT VALUE of non-fixed cash flow from year 1 to year n. Therefore, the formula structure was =NPV(interest rate,cash flow year 1 to year n), while your fomular also included the investment in year 0.

If we want to get the amount of NPV “in financial term”, we need to get the result of the NPV formula and add the amount of investment in year 0.

In other words, the function of NPV formula and PV formula in Excel were the same, while those in financial term were different.

Pls reply to me and forgive me, if I misunderstood your calculations.

Thanks,

Nghia