Net present value (NPV)

Net present value (NPV) is a financial metric used to determine the value of an investment or project by estimating its future cash flows and discounting them back to their current worth. It accounts for the time value of money, meaning that a dollar today is worth more than a dollar in the future. A positive NPV indicates the project is expected to generate more value than it costs, thus potentially worthwhile. Conversely, a negative NPV suggests the investment may result in a net loss. NPV helps investors and businesses assess whether a project or investment is financially beneficial.