Microsoft Office Tutorials and References

In Depth Information

**Chapter 12: Discounting and Depreciation Formulas**

Figure 12-8:
Calculating the NPV using quarterly cash flows.

For an illustration of the difference that can result from different frequencies, see Figure 12-9. It

shows the same data, but this time, the calculations are based on the assumption that the rent of

$48,000 per annum is paid annually in arrears. Still discounting at 7% per annum effective, you

get an NPV of $160,635.26. The formula in cell D32 is

=NPV(C3,D27:D30)*(1+C3)

Figure 12-9:
Calculating the NPV by annualizing quarterly cash flows.

Using the NPV function to calculate accumulated amounts

This section presents two examples that use the NPV function to calculate future values or

accumulations. These examples take advantage of the fact that

FV = PV * (1 + Rate)^nper