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NPV Calc appears incorrect with a large # of negative cash flows
Using NPV on 48 values of which 47 are negative (i.e., a cumulative negative
balance that is increasing to 0). When I LOWERED the interest rate from 10% to 1% the NPV got worse. In both cases, the NPV was a negative but at a lower interest rate it was much more negative. It is almost like it is calculating in the absolute. Donâ€™t understand why. Not even sure I can use NPV on a cumulative balance (trying to do a cost recover model over 4 years) 
#2




MikeW,
I do not believe this is an excel problem, but more of PV vs FV cash flows. At a higher interest rate, cash flows farther in the future are more greatly affected than those in the near term. With a lower hurdle rate/interest rate, all cash flows are greater in future years than with a higher rate based on absolute terms. For example in year 1 at 10%, (1000) is reduced to (909.09). In year 5 it is (620.92). At a 1% rate, (1000) is reduced to (990.10). In year 5 it is (951.46). This makes the cumulative negative cash flows more negative at a lower rate. You can test the excel formula using your own formula {cash flow / (1 + interest rate)^(year n)} "MikeW" wrote: Using NPV on 48 values of which 47 are negative (i.e., a cumulative negative balance that is increasing to 0). When I LOWERED the interest rate from 10% to 1% the NPV got worse. In both cases, the NPV was a negative but at a lower interest rate it was much more negative. It is almost like it is calculating in the absolute. Donâ€™t understand why. Not even sure I can use NPV on a cumulative balance (trying to do a cost recover model over 4 years) 
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