Net Present Value Profile

Net present value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows over a period of time. NPV is used in capital budgeting and investment planning to analyze the profitability of a projected investment or project. NPV = TVECF ? TVIC where: TVECF = Today’s value of the expected cash flows TVIC = Today’s value of invested cash Net present value (NPV) is the calculation used to find today’s value of a future stream of payments. It accounts for the time value of money and can be used to compare investment alternatives that are similar.

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