Understanding net present value formula in Excel

[kathy304]

Cannot determine correct values to enter when using the NPV formulas. Need
to determine NPV for series of debt service payments over a period of 20
years; appreciate any assistance with this formula.

Thanks.

 

[Nigel Forge]

The best advice I can give is that from the Excel help (the discount refers
to inflation rate):Consider an investment that starts at the beginning of the
first period. Suppose you're interested in buying a shoe store. The cost of
the business is $40,000, and you expect to receive the following income for
the first five years of operation: $8,000, $9,200, $10,000, $12,000, and
$14,500. The annual discount rate is 8 percent. This might represent the rate
of inflation or the interest rate of a competing investment.

If the cost and income figures from the shoe store are entered in B1 through
B6 respectively, then net present value of the shoe store investment is given
by:

NPV(8%, B2:B6)+B1 equals $1,922.06