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Input your numbers (project revenues and expenses) in the highlighted cells. Initial investment is the amount you have to put forth at first. The discount rate is interest rate you have to pay or could get on an opportunity cost basis (e.g. financial investment). The period net cash flows are the earnings you get from the investment after expenses are netted out. (To print the results place the cursor inside the spreadsheet and then click on the print icon on the IE menu).

Each cash inflow/outflow is discounted back to its present value (PV). Then they are summed. Therefore NPV is the sum of all terms,

where:

t - the time of the cash flow

i - the discount rate (the rate of return that could be earned on an investment in the financial markets with similar risk.); the opportunity cost of capital

$R t$ - the net cash flow (the amount of cash, inflow minus outflow) at time t. For educational purposes, $R 0$ is commonly placed to the left of the sum to emphasize its role as (minus) the investment.

The result of this formula if multiplied with the Annual Net cash in-flows and reduced by Initial Cash outlay the present value but in case where the cash flows are not equal in amount then the previous formula will be used to determine the present value of each cash flow separately. Any cash flow within 12 months will not be discounted for NPV purposes.