Glossary · N
Net Present Value (NPV)
Net Present Value
The present value of an investment’s net cash flows
What it means
Net present value adds together the discounted cash inflows and outflows of an investment, including its initial cost. Discounting reflects the time value of money and the chosen required return. A positive NPV indicates value above that return under the stated assumptions.
What it means for a business
A finance team can compare two automation proposals by estimating their implementation costs, running costs and savings over a common period. Using a consistent discount rate and testing uncertain assumptions makes the comparison more useful than comparing initial prices alone.