XNPV

XNPV

Short definition

XNPV discounts cash flows on actual calendar dates rather than even periods. Milestones, tax and closing dates break year-box NPV.

Detailed explanation

A mid-year convention is a coarse fix; a milestone calendar and a down-payment need XNPV. Spreadsheet 365-day years differ from ACT/360 contracts.

A purchase close, earn-out and capex certificates are summed at the same r in XNPV. FX cash is not added until it is in one currency.

Why it matters for the CFO

Year-end boxing cheapens a January down-payment and dearens a December collection.

How it is calculated

XNPV = Σ CFᵢ / (1+r)^((dᵢ − d₀)/365)

Each cash flow is discounted at r with exponent day-count/365. r is an effective annual rate.

Variables in the formula

• dᵢ: cash-flow date
• d₀: valuation date

How to read it

The gap between XNPV and period NPV is the value of timing. If the gap is large, the file needs a date table.

Definitions are educational. They are not investment, credit or tax advice.