Advanced · Lesson 12 of 12
Finance formulas
A dollar today beats a dollar later
Money you have now can earn a return, so future money is worth less. Most finance formulas are built on this idea, called the time value of money.
Loans: PMT
PMT finds the steady payment on a loan. Keep periods consistent: for monthly payments, divide the rate by 12 and multiply the years by 12. The minus sign makes the answer positive.
=PMT(B1/12,B2*12,-B3)Projects: NPV
NPV turns future cash into today's value. It treats the first number as one year away, so add today's cost outside the function. Above zero suggests the project beats your required return.
=NPV(B1,B3:B5)+B2Returns: IRR
IRR finds the rate that would make NPV exactly zero. Compare it to your required return.
=IRR(B2:B5)