Finance glossary
Net Present Value (NPV)
Definition
The present value of future cash flows minus the initial investment.
NPV discounts a project expected future cash flows to today and subtracts the upfront cost. A positive NPV means the investment is expected to add value; a negative NPV means it destroys value. It is a cornerstone of capital budgeting decisions.
In a sentence
The project's positive Net Present Value (NPV) meant its discounted cash flows were worth more than its upfront cost.
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