Net Present Value
Money
Net Present Value (NPV) calculates the present value of future cash flows from a project, subtracted by the initial investment. A positive NPV indicates the project is expected to add value in present-day dollars, while a negative NPV suggests a loss.
Formula
NPV = ∑ (Cash inflow for period n / (1 + discount rate)^n) - Initial Investment
Example
If future cash flows have a present value of $150,000 and the initial investment is $100,000, the NPV is $50,000.