topic Re: difference between NPV function in SAS vs Excel in SAS Programming

difference between NPV function in SAS vs Excel

cati — Tue, 18 Apr 2017 12:54:10 GMT

Dear all,

Can you please help me understand the difference between the output in SAS vs Excel when using NPV function?

I have the below example:

No	Cashflow
1	6000
2	5000
3	4500
4	4000
5	3500
6	2500

Rate	5.53%

When computing NPV in SAS :

NPV=(rate, freq, cashflows) ->

NPV =(5.53%, 6, 6000,5000,4500,4000,3500,2500)=25495.37.

The excel output is NPV=21713.68.

I can not figure out the difference or if i computed wrongly in SAS.

Thank you very much,

Re: difference between NPV function in SAS vs Excel

Reeza — Tue, 18 Apr 2017 13:06:40 GMT

Google result:

http://support.sas.com/kb/22/936.html

Diff is due to considering first of month payments or end of month payments.

Re: difference between NPV function in SAS vs Excel

Astounding — Tue, 18 Apr 2017 13:28:19 GMT

As Reeza mentioned, there is a difference in the two sets of calculations. Should the first amount be discounted or not?

But there is also an error in your use of the NPV function. The second number is the frequency of the amounts (how many per time period), not the total number of amounts. So you should be using 1 instead of 6. Here is a test program you can run that illustrates all of these considerations. (You'll have to forgive my formulas for NPV ... they're just in the form that occurred to me as I was programming.)

data test;

input amount;

retain total1 total2 0;

total1 = total1 + (1/1.0553)**_n_ * amount;

total2 = total2 + (1/1.0553)**(_n_-1) * amount;

datalines;

6000

5000

4500

4000

3500

2500

;

proc print;

run;

data _null_;

npv1 = npv(5.53, 6, 6000, 5000, 4500, 4000, 3500, 2500);

npv2 = npv(5.53, 1, 6000, 5000, 4500, 4000, 3500, 2500);

put npv1= npv2=;

run;

Re: difference between NPV function in SAS vs Excel

cati — Wed, 19 Apr 2017 10:25:05 GMT

Thank you very much for your answer.

It is really helpful.

can i have one more question?

for example, i have 2 loans, one with monthly payments, and the other with quarterly payments. From what i understood when computing npv the frequency for the first one should be 1. For the second one, how we should consider the frequency?

thank you

Re: difference between NPV function in SAS vs Excel

cati — Wed, 19 Apr 2017 10:40:01 GMT

Thank you for the answer.

Cati

Re: difference between NPV function in SAS vs Excel

Astounding — Wed, 19 Apr 2017 10:46:57 GMT

I think the answer depends on the interest rate and whether it is a straight interest rate or compounded. I'm afraid I haven't used NPV function before this, however, so I don't know all the details. It's possible that you divide the interest rate by 12 (for monthly) and then use a frequency of 1.

Re: difference between NPV function in SAS vs Excel

cati — Wed, 19 Apr 2017 12:33:53 GMT

Thank you for answering.

Best regards,

Cati