Net present value/Definition: Difference between revisions

Latest revision as of 23:46, 17 June 2010

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A definition or brief description of Net present value.

The sum of the discounted values of a sequence of cash flows.

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-'''Net Present Value (NPV)''' is a time based financial analysis tool used to make capital purchase decisions.
+The sum of the [[discount rate|discounted]] values of  a sequence  of cash flows.
-NPV compares the financal return of spending money to make money (e.g. a capital investment) '''WITH''' retaining the money in a no risk interest generating account over time. The purpose of NPV is to determine the best wealth creation opportunity. A positive NPV means spending the money will create more financial wealth than just allowing it to gain interest.