Saturday, July 26, 2008
Creating Time Value of Money Tables in Excel
If you have ever taken a finance or accounting course, then you may remember using tables from the back of the book to solve time value of money problems. These tables (called PVIF, PVIFA, FVIF, and FVIFA) are falling out of use due to the use of financial calculators and spreadsheets, but they are still being used in some places. I know, because I get requests occasionally for them and I often see people searching my site for them. So, since my site is all about the time value of money, I figured it was about time that I put together a tutorial on how to create these TVM tables using
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Tuesday, June 19, 2007
The NPV Function Doesn’t Calculate Net Present Value
One of the things that has always driven me nuts (because I have to repeatedly explain it in class) is that the NPV function in spreadsheets doesn’t really calculate NPV. Instead, despite the word “net,” the NPV function is really just a present value of uneven cash flow function. It has always been this way, so I’ve learned to live with it. I suspect that this goes all the way back to Visicalc (which you can download and run in a DOS window).
Net present value is defined as the present value of the expected future cash flows less the initial cost of the investment. “Net” always means
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