Answer:
To calculate the NPV of a project in Excel, use the PV function for each cash inflow period and discount it by the given rate, sum up the present values, and then subtract the initial investment.
Step-by-step explanation:
Net Present Value (NPV) Calculation in Excel
To calculate the Net Present Value (NPV) of a project with an initial cost of $100,000 and inflows of $15,000 per year for 12 years at a discount rate of 8%, you can use Excel's PV (Present Value) function. The formula to calculate the PV of a single cash flow in Excel is =PV(rate, nper, pmt, fv, type), where 'rate' is the discount rate, 'nper' is the number of periods, 'pmt' is the payment each period, 'fv' is the future value, and 'type' indicates when payments are due.
In this case, you want to calculate the NPV for each of the 12 years and sum them up, subtracting the initial investment:
Use the formula =PV(0.08, year, -15000) for each year from 1 to 12.
Sum the present values from all 12 years.
Subtract the initial investment of $100,000 from the sum of present values.
This process will give you the project's NPV. If the NPV is positive, it suggests the project may be worth investing in.