Microsoft Office Tutorials and References
In Depth Information
Chapter 12: Discounting and Depreciation Formulas
12
Discounting and Depreciation
Formulas
In This Chapter
Calculating the net present value of future cash flows
Understanding the various approaches for cash flows
Using cross-checking to verify results
Calculating the internal rate of return
Dealing with multiple internal rates of return
Calculating the net present value of irregular cash flows
Finding the internal rate of return on irregular cash flows
Using the NPV function to calculate accumulated values
Using the depreciation functions
The NPV (Net Present Value) and IRR (Internal Rate of Return) functions are perhaps the most
commonly used financial analysis functions. This chapter provides many examples that use these
functions for various types of financial analyses.
Using the NPV Function
The NPV function returns the sum of a series of cash flows, discounted to the present day using a
single discount rate. The cash flow amounts can vary, but they must be at regular intervals (for
example, monthly). The syntax for Excel’s NPV function is shown here; arguments in bold are
required:
NPV(rate,value1,value2, ...)
 
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