difference between NPV function in SAS vs Excel

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difference between NPV function in SAS vs Excel

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:

 

NoCashflow
1          6000
2          5000
3          4500
4          4000
5          3500
6          2500
  
Rate5.53%

 

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,


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‎04-19-2017 06:15 AM
Grand Advisor
Posts: 17,332

Re: difference between NPV function in SAS vs Excel

Google result:

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

 

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

View solution in original post


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Solution
‎04-19-2017 06:15 AM
Grand Advisor
Posts: 17,332

Re: difference between NPV function in SAS vs Excel

Google result:

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

 

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

New Contributor
Posts: 4

Re: difference between NPV function in SAS vs Excel

Thank you for the answer.

 

Cati

Respected Advisor
Posts: 4,973

Re: difference between NPV function in SAS vs Excel

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;

 

New Contributor
Posts: 4

Re: difference between NPV function in SAS vs Excel

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 

 

 

Respected Advisor
Posts: 4,973

Re: difference between NPV function in SAS vs Excel

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.  

New Contributor
Posts: 4

Re: difference between NPV function in SAS vs Excel

Thank you for answering.

Best regards,

Cati

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