Net Present Value

Net Present Value (NPV)

Based on the concept of Time Value of Money. Highly related to the concept of Present Value of Money.

Net Present Value ($NPV$) represents the total present value of a series of future cash flows, adjusted for the Time Value of Money. It’s a key metric for evaluating investment profitability.

Mathematically, it is calculated as:

$$NPV=\sum _{t=0}^n\frac{C{F}_t}{(1+r{)}^t}$$

Where:

• $C{F}_t$: cash flow at time $t$
• $r$: discount rate or required rate of return
• $n$: number of periods

Or using the excel function Excel Function - NPV