⏳ The Time Machine

Goal: Is this investment worth it?
NPV brings future money back to today's value. Money in the future shrinks because of inflation or opportunity cost (Rate).

Year 0
-10k
Year 1
+4k
Year 2
+5k
Year 3
+6k
Net Present Value (Profit/Loss)
$0
Ready...

💻 Formula Structure

=NPV(rate, value1, [value2], ...) + Initial
  • 1. Rate: Discount rate (e.g., 10%).
  • 2. Values: Future cash flows (starting from Year 1).
  • + Initial: Add Year 0 cost manually outside the function!
-- Calculate Value
=NPV( 10%, C1:E1 ) + -10000
Final NPV:
-

⚠️ The "Year 0" Trap

🚫 Including Start Cost
Excel's NPV function assumes the first value happens at the end of Period 1. If you include your initial investment inside the brackets, Excel discounts it as if it happened a year later.
Correct: =NPV(Rate, Year1:Year3) + Year0_Cost