Finance & Interest
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Net Present Value

Present value of a stream of cash flows.

Formula

NPV=∑t=0nCt(1+r)tNPV = \sum_{t=0}^{n}\frac{C_t}{(1+r)^t}

Variables

C_tCash flow at time t
rDiscount rate
nPeriods

Example

A positive NPV means the investment earns more than the discount rate — a go signal.

Did You Know?

Net present value is the gold-standard rule for corporate investment: take the project if NPV is positive.

npvvaluationcash flow