When it comes to financial computations, a spreadsheet tool like Google Sheets can help you get more done in less time.
They feature a lot of built-in financial calculator functions. The NPV function, for example, is used to determine the net present value of an investment.
In investment planning and capital budgeting, net present value is used to assess an investment’s profitability.
It is the difference between the current value of cash inflows and outflows over a given time period. If the Net Present Value (NPV) is positive, it indicates that the investment’s future cash flows will be positive, which is a favorable thing when considering investments or other initiatives.
If the periodic cash flows and discount rates are given, NPV can be easily calculated in Google Sheets.
Using NPV Function
Syntax for this function is –
=NPV(discount, cashflow1, [cashflow2…]) here,
discount – this is the investment’s discount rate over a single period
cashflow. 1 – the first cashflow in the future
This input is optional. cashflow2- If desired, you can continue to add more cashflows to the formula.
This function can be used with either negative or positive cash flows. They’ll be taken into account in the order in which they’re entered into the formula.
The first cash flow in the example above is negative (-300), which represents the investment’s upfront cost. Because the discount rate is 7%, the NPV of this set of cash flows is $689.39.
Google Sheets’ financial capabilities make calculations like NPV exceedingly simple. If you know how to apply this function and have the discount rate and cashflows, you can perform these computations in a matter of seconds.