Microsoft® Excel Data Analysis and Business Modeling

Chapter 8. Evaluating Investments with Net Present Value Criteria

• What is net present value (NPV)?

• How do I use NPV to compare the merits of investments for which cash flows are received at several points in time?

• How do I use the Excel NPV function?

• How can I compute NPV when cash flows are received at the beginning of a year or in the middle of the year?

• How can I compute NPV when cash flows are received at irregular intervals?

Consider the following two investments, whose cash flows are listed in the file NPVExample.xls and shown in Figure 8-1.

Figure 8-1. To determine which investment is better, we need to calculate net present value.

• Investment 1 ...