Financial analysis — Excel Course

PMT, PV, FV, RATE, NPV, IRR and related functions. Learn it step by step with guided practice on Excelquro.

Understand

Financial functions are sensitive to timing, rate units and cash-flow signs. A monthly payment needs a monthly rate and monthly periods. NPV evaluates future cash flows using a discount rate; IRR solves for a rate that makes the cash-flow stream’s NPV approximately zero.

Worked example

The annual rate is converted to a monthly rate because the loan has monthly payments. The negative loan sign follows Excel’s cash-flow convention so the payment displays as positive.

=PMT(B5,B4,-B2)

Follow along

1. List principal, rate, periods and payment frequency.
2. Convert the annual rate to the same period as the payment.
3. Use PMT for periodic payment.
4. Use PV/FV when the question is about value at another point in time.
5. Use NPV/IRR for project cash-flow streams.
6. Check the output against a rough expected magnitude.

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