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Net present value

(accounting) an assessment of the long-term profitability of a project made by adding together all the revenue it can be expected to achieve over its whole life and deducting all the costs involved, discounting both future costs and revenue at an appropriate rate NPV

the process of calculating the value of an investment by adding the present value of expected future cash flows to the initial cost of the investment; the difference between the cost of an investment and the discounted present value of all future earnings from that investment; abbr. NPV

If the net present value is positive, the investment should be made (unless an even better investment exists), otherwise it should not.
Usage Note



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