For equally spaced future cash flows, use Excel’s NPV function and add any cash flow at the valuation date separately. For cash flows on irregular dates, use XNPV with matching cash-flow and date ranges. A company DCF also requires a forecast, a discount rate consistent with that forecast, and—when the explicit forecast ends—a terminal value assumption.
Choose NPV or XNPV based on cash-flow timing
Excel’s NPV function is for equally spaced cash flows that occur at the end of each period. Its first value is treated as arriving one period after the valuation date. Use an annual discount rate with annual periods, for example.
XNPV is designed for cash flows that do not occur at regular intervals. It discounts each amount according to its date, using a 365-day year. Use the function that reflects the timing in your schedule rather than forcing irregular dates into equal periods.
| Function | Use it when | Timing convention |
|---|---|---|
NPV |
Cash flows are equally spaced | Amounts occur at the end of each period; the first value is one period after the valuation point. Microsoft Support |
XNPV |
Cash flows have actual, irregular dates | Each value is paired with a date; subsequent cash flows are discounted using a 365-day year. Microsoft Support |
Calculate present value with NPV
Arrange the cash flows
Put future cash flows in chronological order, with each amount in the period it belongs to. Keep the valuation-date cash flow—often an initial investment—separate from the future-period amounts. Because NPV treats its first included value as a period-end flow, a time-zero amount does not belong in its values argument.
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Enter the formula
If the discount rate is in B1, year-one through year-five cash flows are in B3:B7, and the initial outflow is in B2, enter:
=B2+NPV(B1,B3:B7)
For instance, if B2 contains a negative investment, the formula adds that initial outflow to the present value of the later cash flows. Microsoft states: “If your first cash flow occurs at the beginning of the first period, the first value must be added to the NPV result, not included in the values arguments.” Microsoft Support
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The result is the net present value of the cash-flow series relative to the valuation date, under the discount rate and timing assumptions you entered. A positive NPV means the discounted inflows exceed the included outflows; it does not by itself establish that a company is worth a particular amount.
Calculate present value with XNPV
For irregularly timed cash flows, list each amount beside its corresponding date. In the example below, cash flows are in B2:B6, their dates are in A2:A6, and the annual discount rate is in B1:
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=XNPV(B1,B2:B6,A2:A6)
The values and dates ranges must have the same number of entries, and each cash flow must remain paired with its own date. Microsoft’s function requirements also call for at least one positive and one negative amount. Microsoft Support
Microsoft’s documentation illustrates XNPV with a 9% rate and dated amounts of -$10,000, $2,750, $4,250, $3,250, and $2,750; its example result is $2,086.65. That is Microsoft’s worked example, not a recommended discount rate or an independent test. Microsoft Support
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Build a company DCF in Excel
A company valuation is more than an NPV formula: the model must forecast cash flows, apply a discount rate that matches their definition, account for cash flows beyond the explicit forecast, and calculate the value the reader actually wants. In a common enterprise-value approach, the forecast is unlevered free cash flow to the firm (FCFF), discounted at the weighted average cost of capital (WACC). Other formulations are possible, but the cash flow and discount rate must be consistent. CFA Institute
- Set the valuation date and forecast periods. Decide whether periods are regular (such as annual year-ends) or use actual dates. This determines whether the model should use
NPVorXNPV. - Forecast free cash flow. For an FCFF model, derive unlevered free cash flow from operating results and cash-flow adjustments. The CFA Institute’s 2026 refresher covers adjustments to earnings and operating cash flow used to derive FCFF and FCFE. CFA Institute
- Choose a consistent discount rate. Use a rate appropriate to the cash-flow type and period convention. For an FCFF model, the common pairing is WACC; do not mix a cash-flow definition with a discount rate intended for a different claim on the business.
- Estimate terminal value. A finite forecast normally needs an estimate for cash flows after its final explicit period. Two common approaches are perpetual growth and an exit multiple. These are assumptions, not directly observed facts; identify the method and its inputs. Corporate Finance Institute’s DCF tutorial
- Discount and sum the forecast. Discount each forecast-period cash flow and the terminal value to the valuation date using the model’s timing convention. Their present values form enterprise value in an FCFF model.
- Bridge to equity value if needed. Enterprise value is not automatically equity value per share. Apply the appropriate debt, cash, and share-count adjustments for the model’s cash-flow formulation before presenting per-share value. Corporate Finance Institute’s DCF tutorial
Make assumptions visible and test the result
DCF outputs depend on the forecast and discounting assumptions, not just on the Excel function. A useful model makes the forecast horizon, discount rate, terminal-value method, and terminal assumptions easy to identify. Compare how implied value changes when key assumptions change; in particular, show sensitivity to the discount rate and terminal-value inputs rather than presenting one output as certain.
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Microsoft’s function documentation explains spreadsheet mechanics; it does not validate a particular company’s forecast, rate, or valuation. No company-specific valuation can be inferred without those inputs.
Common Excel errors to avoid
- Including the initial outflow in NPV’s values range: this discounts it as a period-end cash flow. Add a valuation-date amount separately.
- Using NPV for irregular dates: equal spacing is part of NPV’s assumption. Use XNPV when the actual schedule is irregular.
- Misaligning XNPV ranges: every value must correspond to the date in the same schedule position, and the ranges must contain the same number of entries.
- Mixing rate and period units: annual-period NPV cash flows need a rate consistent with that period; XNPV applies its annual rate across elapsed days under its 365-day convention.
- Calling enterprise value per-share value: an FCFF-based enterprise value requires the appropriate bridge to equity value and per-share value.
- Treating terminal value as a known fact: it depends on an assumption such as perpetual growth or an exit multiple, so identify and test that assumption.
For Microsoft’s broader walkthrough of NPV and IRR in Excel, see Go with the cash flow: Calculate NPV and IRR in Excel.
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