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NPV or Net Present Value in Excel
NPV or the Net Present Value can help decide whether a company should
pursue a project or discard it. The function gives us a net value of
the total discounted revenues minus the total discounted costs. By a
discounted revenue we mean a revenue that takes into account an earning
that we could have got by pursuing another project or keeping the money
as fixed deposit in the bank. Also we give importance to the time value
of money in the NPV calculations. All our revenues and costs that we
earn or incur in the future will be converted back to revenues and
costs at today's value of our money by using discounted values. The
result of our calculations is therefore a value that gives the amount
of money we'll earn at today's currency value. Also if the calculation
gives us a negative value we can assume that the project is not viable.
In our example, we have shown how to deal with the straight
line depreciation method and taxation.
Before you watch the video we have also given a screen shot of the
whole project.
The training video guides you through the complete process based on a
fictitious example of a mobile computer training center.
NPV or Net
Present Value in Excel
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