Microsoft® Office Excel® 2007: Data Analysis and Business Modeling, Second Edition

Chapter 7. Evaluating Investments by Using Net Present Value Criteria

• What is net present value (NPV)?

• 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 a 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 NPV.xlsx and shown in Figure 7-1 on the next page.

• Investment 1 requires a cash outflow of $10,000 today and $14,000 two years from now. One year from now, this investment will yield $24,000.

• Investment 2 requires a cash outflow of $6,000 today and $1,000 two years from now. One year from now, this investment will yield $8,000.

Which is the better investment? ...