Net Present Value (NPV)

Net present value (NPV) is a cash flow measurement over a specific time period that is frequently used to determine profitable budgeting strategies and capital allocations for various investment types. The NPV is calculated by comparing cash inflow and cash outflow variations. The present value of the return is calculated by comparing an initial amount of cash spent to the present value of the return. Furthermore, NPV frequently employs four key metrics to determine whether an investment return is positive or negative: time, present value, future value, and discount rate.