Net Present Value Defined
Net present value or NPV is a financial method of appraising long-term style projects in the areas of budgeting capital, measuring cash flow shortfall or excess once they have been met. In terms of calculations, NPV equals the current value of net flow cash. Companies use it to provide future cash that is discounted to current values. It is also used to determine the rate of investment for a different venture and by doing so companies can determine if the original project idea is more or less worthwhile profit-wise than the alternative one. Investors use NPV to calculate their rates of return to choose the most profitable one.