While calculating the net present values, a time comes when we are faced with negative cash flows. In excel, we can still get the NPV even when we have the negative cash flows. In this article, we shall learn how to calculate NPV in excel with negative cash flows
Figure 1: Calculating NPV with negative cash flows
General syntax of the formula
=NPV(rate, -cash flows)
Understanding the formula
- In excel, it is possible to get the net present value even when you only have negative cash flows.
- All you need to do is to subtract all numbers, instead of adding them.
- When you are looking to get the NPV with negative cash flows, you should also expect the NPV to be negative.
- Consider an example where the initial cost outlay is $500,000, required rate of interest is 5% and needs additional outlays of $750, 000 in year one or two. Here, the NPV will be negative $500, 000 minus $680, 272, minus 714, 285. The NPV will thus be $1, 894, 557
- This can be done in excel as shown in the example below
Figure 2: Example of how to calculate NPV with negative cash flows
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