If you have a series of cash flows that occur at irregular intervals, you need to use the XNPV function to find the net present value.
- [Instructor] In the previous movie, I showed you how to…use the NPV function to find the net present value…of an investment.…That function assumes that all the cash flows happen…at regular intervals.…Every month, every two months, every year and so on.…If you have a series of cash flows that occur…at irregular intervals, you need to use the XNPV function…to find the net present value.…I'll demonstrate how to do that in this movie.…My sample file is the irregular flows workbook…and you can find it in the chapter two folder…of the exercise files collection.…
The XNPV function takes three arguments.…The first is the discount rate, just called rate,…which I have here in cell B3.…The rate is the amount of money that you could get…risk free from the investment.…That could be a product line that you're very confident in,…that could be a government security such as a treasury bond…and so on.…In this case, you're assuming 5.75%.…The next set of arguments are the cash flows and the dates…on which those flows will occur.…
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- Calculating the effect of interest rates and inflation
- Finding the arithmetic and geometric means of growth rates
- Calculating the future and present value of an investment
- Calculating loan payments for a fully amortized loan
- Calculating the effect of paying extra principal with each payment
- Finding the number of periods required to meet an investment goal
- Calculating net present value and internal rate of return
- Building a cash tracking worksheet
- Visualizing cash flows using a waterfall chart