There is no significant difference between XNPV and NPV. XNPV is simply a modified version of NPV that takes the time value of money into the account. NPV and XNPV are used to derive the net present value of cash flow between two payments. But first, what exactly do XNPV and NPV do? In this article, we'll compare and discuss the key differences between the two methods XNPV Vs NPV.
What is XNPV?
XNPV is similar to the NPV concept, with the primary difference being the time interval. When computing XNPV, cash payments are not assumed to take place at the same time. This appears to be a better and more practical solution, and it also improves precision.
What is NPV?
Net present value(NPV) is the result of discounting all of the cash inflows and outflows and then combining all of their present values. This means that the original(often the investment made at the present time) is a deduction from the other present values.
XNPV Vs NPV | Difference between XNPV and NPV:
- Both NPV and XNPV show the present value of all future cash flows by using the discount rate but NPV uses the total time period to calculate it while XNPV uses the specific dates of expenses.
- XNPV is used when payments are irregular. When payments are equal in time intervals, NPV determines the net present value.
- For calculating XNPV, an additional date range must be chosen. The discount rate and numbers are necessary for Excel to calculate the NPV.
- The value returned by using the XNPV formula is more precise because it doesn't assume an equal time interval like in the case of NPV.
- In XNPV error messages are common since the date is not given in the right format in excel sometimes which doesn't occur in NPV.
- The NPV and XNPV can be computed via Microsoft excel's financial function featured. They can also be computed using a calculator. Although using a spreadsheet is easier and less prone to mathematical errors.
- Computing for the NPV and XNPV yields different results even if the same input values are used.
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