question - The passage below require analysis and break down

Net Present Value (NPV) is most effective capital budgeting tool. It is useful to determine the difference between project cost (cash outflows) and cash inflows. This tool is most significant because it uses discounted cash flow analysis in which future cash flows can discount at discount rate so that to ensure the compensation for the possible uncertainty in future cash flows means this method helps to define that 'present value' of the cash flow would not worth as much for future cash flows. If there is high NPV then it means project as already a high 'present value' that worth to meet the future cash flows means project is independent and acceptable means company is paying less in its costing, Schmidt, Robert (2015). For example; if a company is able to reduce its costing then the value of NVP would become high as;

NPV= Present Value Cost

Like, if a project has cash inflows $10 million while its cash outflows (cost) is $8 million in 2 years then

PV annuity factor would be 1.2

For next year PV annuity factor 0.73

Therefore, NPV is 1.93. Hence, the reason of high NPV is only due to its low cost means low cash outflows.