Hi,

I have a problem regarding the NPV function on Excel. Does anyone know how
to use the function if the interest rate changes over a period of 20 years.
Say for example, for the first 8 years the interest rate is 8%, then for the
next 5 it's 12%, and for the last 7 it's 14%.

It would be great if any one can me with this!

thanks!

As far as I can tell, there is no way you can vary the discount rate in the
NPV function in Excel. In fact it is very difficult to model this in any
calculation tool.

Here is an interesting article which may help you see the difficulty;
http://www.finaid.org/loans/npv.phtml

--
Ken Russell


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"yijaeja" wrote in message
...
Hi,

I have a problem regarding the NPV function on Excel. Does anyone know
how
to use the function if the interest rate changes over a period of 20
years.
Say for example, for the first 8 years the interest rate is 8%, then for
the
next 5 it's 12%, and for the last 7 it's 14%.

It would be great if any one can me with this!

thanks!

yijaeja -

Maybe you could use the sum of three separate NPV computations based on
three separate streams of cash flows.

For the first 8 years, compute NPV at 8% using just the first 8 cash flows.

For the middle 5 years, compute NPV at 12% using another stream of cash
flows with zero cash flow for the first 8 years and the actual cash flows
for years 9 through 13.

For the last 7 years, compute NPV at 14% using another stream of cash flows
with zero cash flow for the first 13 years and the actual cash flows for
years 14 through 20.

Then sum the three results of the three NPV calculations.

- Mike

www.mikemiddleton.com

"yijaeja" wrote in message
...
Hi,
I have a problem regarding the NPV function on Excel. Does anyone know
how to use the function if the interest rate changes over a period of 20
years. Say for example, for the first 8 years the interest rate is 8%,
then for the next 5 it's 12%, and for the last 7 it's 14%.
It would be great if any one can me with this!
thanks!