Net Present Value
Definition of Net Present Value as it relates to Finance, Capital Budgeting, Present Value
Net Present Value (NPV) is a financial concept that falls under Capital Budgeting and is a type of Present Value. It represents the difference between the present value of cash inflows and outflows associated with an investment opportunity, reflecting the net change in wealth that results from undertaking the project. NPV evaluation helps decision-makers assess the potential profitability and determine whether or not an investment should be pursued, as a positive NPV indicates expected economic gains while a negative value signals losses.