Difference between revisions of "Documentation/How Tos/Calc: NPV function"
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<tt>'''NPV(0.0875; A1:A3)'''</tt> | <tt>'''NPV(0.0875; A1:A3)'''</tt> | ||
: where cells A1:A3 contain <tt>'''1000'''</tt>, <tt>'''2000'''</tt> and <tt>'''3000'''</tt>, returns <tt>'''4943.21'''</tt> similarly. | : where cells A1:A3 contain <tt>'''1000'''</tt>, <tt>'''2000'''</tt> and <tt>'''3000'''</tt>, returns <tt>'''4943.21'''</tt> similarly. | ||
| + | |||
| + | === Issues: === | ||
| + | * The discount rate chosen is assumed to compound each period. If the period is say one month, and you wish to calculate using a competitive return known over one year, you might choose a discount rate of a twelfth of the competitive return - but be aware that this is not absolutely accurate. There is no simple formula. | ||
{{Documentation/SeeAlso| | {{Documentation/SeeAlso| | ||
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* [[Documentation/How_Tos/Calc: Functions listed alphabetically|Functions listed alphabetically]] | * [[Documentation/How_Tos/Calc: Functions listed alphabetically|Functions listed alphabetically]] | ||
* [[Documentation/How_Tos/Calc: Functions listed by category|Functions listed by category]]}} | * [[Documentation/How_Tos/Calc: Functions listed by category|Functions listed by category]]}} | ||
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Revision as of 16:27, 2 March 2009
NPV
Returns the net present value of an investment with regular cash payments.
Syntax:
NPV(discountrate; payment1; payment2; ... payment30)
- payment1 to payment30 are up to 30 numbers or ranges containing numbers, representing payments made at the end of each of a series of fixed length periods. The payments may be both positive and negative, for income and outgoing.
- discountrate is the discount rate (expressed as a fraction of 1) which you consider applies to one single period. It is assumed to be constant for all periods.
- NPV calculates the net present value using the formula:
Example:
NPV(8.75%; 1000; 2000; 3000)
- where the discount rate 8.75% is the assumed competitive return over one year, and 1000 is to be paid at the end of year 1, 2000 at the end of year 2 and 3000 at the end of year 3, returns 4943.21 as currency.
NPV(0.0875; A1:A3)
- where cells A1:A3 contain 1000, 2000 and 3000, returns 4943.21 similarly.
Issues:
- The discount rate chosen is assumed to compound each period. If the period is say one month, and you wish to calculate using a competitive return known over one year, you might choose a discount rate of a twelfth of the competitive return - but be aware that this is not absolutely accurate. There is no simple formula.
