Microsoft KB Archive/51585

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Excel NPV Function Result Versus Lotus 1-2-3 Result

Last reviewed: July 24, 1996
Article ID: Q51585

The information in this article applies to:

  • Microsoft Excel for Macintosh, versions 2.x, 3.0, 4.0, 5.0 5.0a
  • Microsoft Excel for Windows, versions 2.x, 3.0, 4.x, 5.x, 7.0 7.0a
  • Microsoft Excel for OS/2 versions 2.2, 2.21, and 3.0

SUMMARY

In Microsoft Excel, the NPV (net present value) function is defined as follows

   NPV(rate,value1,value2,...)

where

           n        Value i
   NPV=(SUM) --------------------
          i=1      (1+rate)^i

In Lotus 1-2-3, the i starts at 0 (zero). Therefore, if the NPV in Microsoft Excel's calculation includes the investment or the first entry, it does not give the same answer as Lotus or a calculator. To get the same answer, the investment should be excluded in the NPV values and added at the end of the NPV formula.

MORE INFORMATION

For example:

   A1: Investment  B1: $-40000    <--- negative value required
   A2: year1       B2: $  8000
   A3: year2       B3: $  9200
   A4: year3       B4: $ 10000
   A5: year4       B5: $ 12000
   A6: year5       B6: $ 14500

If the NPV is entered in Excel as =NPV(8%,B1:B6), it may give an unexpected result. It could be entered as =NPV(8%,B2:B6)+B1. This will return $1,922, which is what Lotus 1-2-3 and a calculator would return.

REFERENCES

"Microsoft Excel Functions and Macros," version 2.x, pages 92-94

"Microsoft Excel Function Reference," version 3.0, pages 162-163


KBCategory: kbusage

KBSubcategory:

Additional words: 5.00 2.00 2.0 2.01 2.1 2.10 2.2 2.21 2.20 3.00
3.0 4.0 4.00


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Last reviewed: July 24, 1996
©1997 Microsoft Corporation. All rights reserved. Legal Notices.