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 of 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.
- [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 use the XNPV function here.…My sample file is IrregularNPVSchedule_O3_O5…and you can find it in the chapter three folder…of your exercise files collection.…
What I want to do is evaluate a series of cash flows…based on a discount rate.…The discount rate, which you see here in cell C2 is 5%.…The discount rate represents my risk free return.…In other words, if I am assured with no risk…that I can get 5% on a bond investment…or perhaps by investing in an existing product,…then my discount rate would be 5%.…The reason that we use 5% in NPV and XNPV calculations…is that we are looking for the economic return…
- Analyzing loans, payments, and interest
- Calculating depreciation
- Determining values and rates of return
- Calculating bond coupon dates and security durations
- Calculating security prices and yields
- Calculating prices and yields of securities with odd periods
- Analyzing simulation results
Skill Level Intermediate
1. Analyzing Loans, Payments, and Interest
2. Calculating Depreciation
3. Determining Values and Rates of Return
4. Calculating Bond Coupon Dates and Security Durations
5. Calculating Security Prices and Yields
6. Analyzing Simulation Results
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