Net Present Value (NPV)

Net Present Value (NPV) measures the present value of an investment, taking into account the sum of its future cash flows discounted appropriately. NPV is calculated by the formula:

$$NPV \mmlToken{mo}[linebreak="auto"]{=}-C_{0}+\sum_{i=1}^{t}\frac {C_{i}}{(1+r)^{i}}$$

C₀— initial investment;
r— discount rate (e.g., weighted average cost of capital);
t— number of periods.

As a general rule, all cash outflows should be negative in the formula, while inflows should be positive. The Greek symbol "Σ" (sigma) denotes summation in mathematics.

See also:

• Internal Rate of Return (IRR)
• Modified Internal Rate of Return (MIRR)
• Profitability Index (PI)
• Future Value
• Present Value
• Present Value of Annuity