What does NPV stand for?

Net present value (NPV) is the current value of a future investment.

NPV is used in budgeting and investment planning to analyze the profitability of a projected investment or project. NPV accounts for the time value of money and can be used to compare the rate of return of different projects.

Net Present Value (NPV) Formula

If there’s one cash flow from a project that will be paid one year from now, then the calculation for the NPV of the project is as follows:

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