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What is Net present value?

The value today of a stream of future cashflows, each discounted by how far away it is, less what you have to put in.

A positive figure means the project beats the rate you discounted at. It does not mean the project is a good idea, and the answer is only ever as good as the rate chosen.

NPV = sum of C_t / (1 + r)^t

Not to be confused with Internal rate of return

NPV answers in money and IRR answers in percent, so IRR ignores scale. A tiny project with a spectacular percentage can be worth far less cash than a large one with a modest return, which is why NPV is the tie-breaker.

Where this is used