Mac Works: Timing of Payments in the NPV() Function
  
PSS ID Number: Q102139
Article last modified on 10-22-1998
 
3.0 4.0
 
MACINTOSH
 

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The information in this article applies to:
 
 - Microsoft Works for the Macintosh, versions 3.0 and 4.0
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SUMMARY
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The Microsoft Works NPV() function assumes that all payments occur at
the end of each period. In many cases, however, the investment is
likely to occur at the beginning of the first period. In other words,
the initial investment probably will occur today, while the return on
the investment probably will begin one year from now.
 
To account for this difference, take the initial investment out of the
NPV() function and put it at the end of the formula, as in the
following
 
   =NPV(rate,inflow 1,inflow 2,) - investment
 
where "rate" is the percent rate, "inflow 1" is the return one year
from today, and "inflow 2" is the return two years from today.
 
MORE INFORMATION
================
 
For example, take a $15,000 investment that will return $5000 one year
from today, $7500 two years from today, and $8200 three years from
today. Assuming a hurdle rate of 10 percent, you can use the following
formula
 
   =NPV(10%,5000,7500,8200)-15000
 
to calculate the net present value, which is as follows:
 
   $1,904.58
 
KBCategory: kbother
KBSubcategory: macworkskb
 
Additional reference words: 3.00 mwksss M_eXcel npv
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Version           : 3.0 4.0
Platform          : MACINTOSH
Issue type        : kbinfo
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Copyright Microsoft Corporation 1998.