Net present value (NPV) represents the difference between the present value of cash inflows and outflows over a set time period. Knowing how to calculate net present value can be useful when choosing ...

Net present value and the profitability index are helpful tools that allow investors and companies make decisions about where to allocate their money for the best return. Net present value tells us ...

When a company is making capital budgeting decisions -- whether it's something as small as buying a new copier vs. servicing an old one or as big as entering a new market -- it must weigh the expected ...

Small business owners frequently make decisions about how to invest money to increase profitability. Part of being a good business manager is the ability to analyze the income potential of long-term ...

The discount rate refers to the interest rate used when calculating the net present value (NPV) of an investment. It represents the time value of money, which is the concept that a sum of money today ...

Investopedia contributors come from a range of backgrounds, and over 25 years there have been thousands of expert writers and editors who have contributed. Amy is an ACA and the CEO and founder of ...

Calculate the present value of each year's cash flow by dividing by (1 + discount rate)^number of years. Sum all present values to find the total value of projected cash flows, which in this example ...

Credit: By discounting every future $3,000 cash flow back at a rate of 10%, and subtracting the initial cash outlay of $15,000, we arrive at a net present value of $3,433.70 for this project. Under ...

Present value is a useful mathematical formula designed to figure out if money received now is worth more than money received later. What Is Present Value? Terms Associated With the Present Value of ...

Chris Gallant, CFA, is a senior manager of interest rate risk for ATB Financial with 10 years of experience in the financial markets. Andy Smith is a Certified Financial Planner (CFP®), licensed ...

In corporate finance and valuation, experts and self-taught learners rely upon various guiding principles. One of those core principles is the time value of money. Whether you’re a professional in the ...