What is the Net Present Value?
Businesses use the analysis of cash flows to make decisions about project viability.
A project’s future cash flows must all be pulled back to present day dollars to determine the investment’s worth in today’s dollars.
The initial and future investment outlays are negatives.
In Net Present Value analysis, negatives are offset against the project’s returns.
Projects with a positive return may be viable, but also may be compared to other viable projects based on the best return.
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