In the case of investing money in a business, we need to consider many factors related to the investments and keep up to date. Net Present Value which is generally known as **NPVÂ **is also a financial factor. In Microsoft Excel, we can calculate Net Present Value using both the **X****NPV **function and the **NPV **function. In this article, I will try to show a comparison between** XNPV **vs** NPV **functions while calculating Net Present Value.

## What Is Net Present Value (NPV)?

A financial indicator used to evaluate the profitability of an investment is the **Net Present Value (NPV)**. It is estimated by subtracting the investment’s initial cost from the present value of the future cash flows. As it takes into account the time value of money, the NPV calculation is crucial.

The **NPV **formula is mentioned below:

**NPV = Present Value of Future Cash Flows – Initial Cost**

We can calculate the present value based on future cash flows using the following formula:

** **

*Here, Future Value is the expected net cash inflow or outflows, r is the discount rate, and t is the number of time periods.*

This basic strategy is used by **NPV** to bring all future cash flows to a single point in time. The expanded formula for NPV is as follows:

** **

## What Is Excel NPV Function?

**The NPV function** is defined by the following syntax in Excel:

`=NPV (rate, value1, [value2], ...)`

__Â Arguments Explanations__:

Argument | Required/Optional | Explanation |
---|---|---|

rate |
Required | Discount rate over one period. |

value1 |
Required | First value(s) representing cash flows. |

value2 |
optional | Second value(s) representing cash flows |

## What Is Excel XNPV Function?

We can also calculate **NPV **with the **XNPV** function. The **XNPV function** follows the following syntax:

`=XNPV(rate, values,dates)`

__Â Arguments Explanations__:

Argument | Required/Optional | Explanation |
---|---|---|

rate |
Required | defines the discount rate that will be applied over the cashflows |

values |
Required | represents cash flows. |

dates |
Required | Cashflow dates |

**Read More: **XIRR vs IRR in Excel

## How Can We Calculate Net Present Value with Excel NPV Function?

We can easily calculate the **Net Present Value **with the **NPV function.** For this, we just need to assign the values according to the syntax.

** Steps**:

- Create a dataset with cashflows over a certain period of time. I have arranged them in the
**Periods**and**Cashflows**I have also considered the**Annual Discount Rate**.

- Now, input the following formula to calculate the
**Net Present Value**with the**NPV**function:

`=NPV(D11,D5,D6,D7,D8,D9)`

Here,

**D11 **= Annual discount rate

**C5**, **C6, C7, C8, C9 **= Cashflows over a certain time interval

- Press
**ENTER**to have the**Net Present Value**. You can modify the cells according to your preferences.

We can cross-match the result with the basic arithmetic formula. For this, I have separately calculated the **Present Value **over the time period and used summation to have the **Net Present Value**.

We can see that both the results are the same. In order to lessen our work hassle, we can use the **NPV function** to calculate **Net Present Value**.

## How Can We Calculate Net Present Value with Excel XNPV Function?

We can also calculate the **Net Present Value **with the **XNPV **function. Just follow the steps mentioned below and you will have your desired result.

** Steps**:

- Arrange the
**Date**and**Cashflows**in separate columns. - Consider the
**Discount Rate**.

- Next, apply the following formula to have the
**Net Present Value:**

`=XNPV(C11,C5:C9,B5:B9)`

Here,

**C11** = Discount Rate

**C5:C9** = Cashflows at a different time period

**B5:B9 **= Date

- Finally, press
**ENTER**to have the**Net Present Value**.

**Read More: **How to Convert Percentage to Basis Points in Excel

## In What Way XNPV Is Different from NPV Function?

From the above discussions, we can say that we can calculate **Net Present Value **with the **NPV function** as well as the **XNPV function.** But there is a lot of difference between these functions. They are listed below:

- The main difference between the
**NPV**and the**XNPV functions**is that the values input in the**NPV function**are equally spaced in terms of time period, whereas the values input in the**XNPV function**are not equally spaced. **Net Present Value**calculation with**NPV function**does not require dates. But It is a must to have an actual set of dates with the cashflows in the**XNPV function.****XNPV**returns the more accurate results as it takes the actual set of dates.- Warning due to error is very common in terms of working with the
**XNPV**function as it follows a specific date pattern. On the other hand, there is no issue with the date pattern in the**NPV function**as there is no use of date in it.

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## Conclusion

At the end, I like to add that I have just tried to explain the comparison and use of the **XNPV** vs **NPVÂ **function while calculating Net Present Value. You can apply any of these functions to calculate Net Present value considering the merits and demerits mentioned above. If you have any further queries, comment below. You can also visit our site to have more knowledge related to Excel.

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Thanks a lot Taryn!!!

I m a Finance Student and need this formulas a Lot!!!!

You have very easily explained the concepts.!!!

Looking foreword for more:):):):):):)

You are most welcome. We are intending to do a financial functions tutorial series so lookout for that ðŸ™‚ Best of luck with your studies as well ðŸ™‚