From the course: Excel: Analyzing and Visualizing Cash Flows

Unlock the full course today

Join today to access over 22,600 courses taught by industry experts or purchase this course individually.

Calculate the net present value of an investment

Calculate the net present value of an investment

From the course: Excel: Analyzing and Visualizing Cash Flows

Start my 1-month free trial

Calculate the net present value of an investment

“

- [Instructor] The net present value of an investment is the present value of the investment minus the amount of money it costs to buy into the investment. All the investment's cash flows must occur at the same interval for the calculation to be accurate. I'll show you in this movie how to calculate the basic NPV of a project. My sample file is the NPV workbook, and you can find it in the chapter two folder of your exercise files collection. The NPV function requires two arguments. The first is the rate. This is the risk-free rate, which is the return that you could get on your investment without risk. So for example, if you run a company and you have a product line that sells very well, but you know there's more demand out there for you, you could invest in that product line and get a return of 5.75% in this case. In many cases, you will use the risk-free rate that reflects the treasury bonds for the period of time for your investment. For example, a 10-year treasury bond might…

Contents