In 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**.

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## Introduction of NPV

A financial indicator used to evaluate the profitability of an investment is the **Net Present Value (NPV)**. It is estimated by subtracting the investmentâ€™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 â€“ Initial Cost**

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

** **

*Here, Future Value is expected net cash inflow or outflows, r is the discount rate, 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:

** **

## Syntax of 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 |

## Syntax of 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 |

## Calculating Net Present Value with 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
**Net Present Value**with**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 same. In order to lessen our work hassle, we can use the **NPV **function to calculate **Net Present Value**.

**Read More:** **How to Use PV Function in Excel (3 Examples)**

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## Calculating Net Present Value with 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**.

## Comparisonal Observations from the Applications of XNPV vs NPV Functions

From the above discussions, we can say that we can calculate **Net Present Value **with **NPV **function as well as **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**NPV**function as there is no use of date in it.

## 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 dermits mentioned above. If you have any further queries, comment below. You can also visit our site to have more knowledge related to Excel.

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™‚