We cover how to calculate Net Present Value using cash flows that occur on specific dates. In a previous video, we showed how to calculate NPV using the NPV function. A shortcoming of this method is that it assumes all the time periods are equal. This will give a less accurate result if you’re trying to calculate the net present value of a project that generates cash flows at different moments in time. To overcome this, we can use the XNPV function.
In our example, we have a project with an initial Investment of £500,000 today and subsequent cash flows of £120,000 in the subsequent 10 periods. We first compare the result given by the NPV and XNPV functions and then explain how the XNPV output is calculated.
Calculate Net Present Value To Decide Between Two Projects In Excel - NPV Function:
https://youtu.be/wU22dZnE1_4
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XNPV v NPV: (0:52)
How Is XNPV Calculated: (1:55)