NPV function
NPV discounts a series of future cash flows back to today at a given rate, so you can judge whether an investment beats your cost of capital. The catch: NPV assumes the first value arrives one period from now. An upfront investment at time zero must be added outside the function, not included in it.
- Available in
- Every current version
- Category
- Financial functions
- Returns
- The present value of the cash flows. A positive NPV (after adding the upfront cost) means the project earns more than the rate.
- Google Sheets
- Works the same in Google Sheets.
Syntax
=NPV(rate, value1, [value2], ...)
| Argument | Required? | What it is |
|---|---|---|
rate | Required | The discount rate per period, such as your cost of capital. |
value1 | Required | The first future cash flow, one period from now, or a range of them. |
value2 | Optional | More cash flows, one period apart, in order. |
Examples
Each result below is calculated from the sample sheet by our formula engine, the same one that grades the practice.
| Cell | Formula | Result | What it shows |
|---|---|---|---|
| E2 | =NPV(D2,B3:B6)+B2 | $8,565 | Discount years 1 to 4, then add the year-0 outlay |
| E3 | =NPV(D2,B2:B6) | $7,786 | Wrong: including year 0 discounts the outlay by a year |
| E4 | =NPV(D2,B3:B6) | $58,565 | Present value of the future cash flows alone |
Try it live
This is the sample sheet. Change any number or text, or edit a formula, and the results update.
Show the sample data as a table
| Year | Cash flow | Rate | Result | |
| 0 | -$50,000 | 10% | $8,565 | |
| 1 | $15,000 | $7,786 | ||
| 2 | $18,000 | $58,565 | ||
| 3 | $20,000 | |||
| 4 | $22,000 |
Practice NPV
From lesson 27, NPV & IRR. Graded instantly, then re-checked on changed data.
Net present value
E4, calculate the project's NPV at the discount rate in E2. Year 0 is an upfront investment.Common mistakes
| What you see | Why, and how to fix it |
|---|---|
| NPV is a bit too high or too low | The year-0 investment was included in the range, so NPV discounted it as if it happened a year later. Add it separately: =NPV(rate, B3:B6)+B2. |
| Ignoring the order of cash flows | NPV assumes the values are evenly spaced and in time order. For cash flows on irregular dates, use XNPV, which takes the actual dates. |
| A rate in the wrong units | Use an annual rate for yearly cash flows and a monthly rate for monthly ones. |
Tips
- Check your NPV with IRR: at a discount rate equal to the IRR, the NPV is zero.
Questions
How do I calculate NPV in Excel?
Use =NPV(rate, year1:yearN) + year0. The upfront cost at time zero goes outside NPV because the function assumes the first value is a year away.
Why is Excel's NPV different from my finance calculator?
Most often the year-0 cash flow was included inside NPV. Excel discounts every value in the function by at least one period.
What does a positive NPV mean?
The investment returns more than the discount rate, so it adds value at that cost of capital.
Lessons that use NPV
- Lesson 27: NPV & IRR (Pro)
Last reviewed October 2026. Every example result on this page is calculated live by the Spreadsheet Practice formula engine.