The document discusses various financial functions in Excel including NPV, FV, PMT, SLN, and IRR. It provides the formulas and examples for calculating net present value, future value, loan payments, straight-line depreciation, and internal rate of return. Each function is explained along with notes on its use and how to interpret results.

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FINANCIAL FUNCTIONS
IN
Prepared By:- Rutvik Poshiya
Submitted to:- THE ICAI, Rajkot

2. Financial Functions
• The Financial Functions performs many of
the common Financial calculations, such
as calculation of Yield, Interest rate,
Duration, valuation and Asset
depreciation.
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3. Some useful Financial
Functions
 NPV (Net Present Value)
 FV (Future Value)
 PMT (Payment)
 SLN (Straight-line depreciation)
 IRR (Internal Rate of Return)
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4. NPV FUNCTION
Net Present Value
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5. NPV
• NPV stands for Net Present Value.
• NPV calculates the net present value of an
Investment based on discount rate and a series
of future payments and income.
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6. Formula of NPV
• =NPV(rate, value 1, [value 2],….)
where,
• Rate= Rate of discount
• Value 1= Initial cost of investment
• Value 2, 3,….= Future Payments
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7. Example of NPV
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8. FV FUNCTION
Future Value
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9. FV(Future Value)
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• FV calculates Future Value of Investment with periodic
constant payments and a constant interest rate.
• For all the arguments, cash paid out, such as deposits to
savings, is represented by negative numbers.
• Whereas, cash received, such as dividend cheques, is
represented by positive numbers.
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10. Formula of FV Function
• Formula:- =FV(rate, nper, pmt, [pv], [type])
• Where,
• Rate= Interest rate per period
• Nper= Total no. of payment periods in an Annuity
• Pmt= Payment made in each period
• Pv= Present value of future payments
• Type= It indicates when payments are due. (it can
take values 0 or 1, if type is omitted, it is
assumed to be 0)
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11. Example 1
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12. Example 2
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13. PMT FUNCTION
Payment of Loan
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14. PMT Function
• It calculates the payment for a
loan (installment) based on
constant payments and a
constant interest rate.
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15. Formula of PMT
• =PMT(rate, nper, pv, [fv], [type])
• Where,
• Rate= Interest rate per period for the loan.
• Nper= Total no. of payments for the loan.
• Pv= Present value of future payments; also
known as The Principal.
• Fv= Future value or cash balance to be attained
after the last payment is made.
• Type= It indicates when payments are due.
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16. NOTE:
• In the formula,
• =PMT(rate, nper, pv, [fv], [type])
• ,
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Set type equal to If payments are due
0 At the end of the period
1 At the beginning of the period
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17. Example 1
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18. Example 2
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19. SLN FUNCTION
Straight Line
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20. SLN Function
• It returns the Straight-line depreciation of
an asset for one period.
• SLN method provides the depreciation
allowance for each year.
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21. Formula of SLN
• =SLN(cost, salvage, life)
• Where,
• Cost= Initial cost of Asset.
• Salvage= Salvage value of the asset at
the end of its life.
• Life= Useful life of Asset
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22. Example
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23. IRR FUNCTION
Internal Rate of Return
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24. IRR Function
• It returns the Internal rate of return for a series of cash
flows represented by the numbers in values.
• These cash flows do not have to be even, as they would
be for an annuity.
• However, the cash flows must occur at regular intervals,
such as monthly or annually.
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25. IRR Function
• The Internal Rate of Return is the interest
rate received for an investment consisting
of payments(negative values) and
income(positive values) that occur at
regular periods.
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26. Formula of IRR Function
• =IRR(values, [guess])
• Where,
• Value= a reference to cells that contains series of
cash flows (Investment and Net Income
values); and it must contain one positive and
one negative value.
• Guess= An initial guess at what the user think the
IRR might be. This is an optional argument, which,
if omitted, takes on the default value of 0.1 (10%)
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27. Note:
• If IRR gives the #NUM! error value, or
if the result is not close to what is
expected, try again with a different
value for guess.
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28. Example 1
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29. Example 2
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