NPV function example

[voiceliu]

In the excel NPV function example provided by Microsoft office, it states:
A2: Annual discount rate: 0.1
A3:
Initial cost of investment one year from today
-10000
A4:
3000
Return from first year
A5：
4200
Return from second year
A6：
6800
Return from third year
The example says we should use the formula as: NPV(A2, A3, A4, A5, A6)
However, based on my understanding, since A3 and A4 occurs in the same year, then we should use the formula as: NPV (A2, (A3+A4), A5, A6).
Could anyone assist to check why I am wrong on this?
Thanks!

 

[Andrew Poulsom]

Welcome to MrExcel.

The assumption is that there is one year between the initial cost and the first return. Your formula assumes that both are simultaneous.