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Net present value is the sum of the present values of future outgoing and incoming cash flows for a period of time. It is a way to evaluate strategies and investments that considers the time value of money.
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| Function | Financial ManagementManagement Accounting | | Definition | The sum of future cash flows for an investment discounted to their present value. | | Example | An investor is considering building a rental property. In order to understand the investment they calculate a present value of cash flows that includes future rent and future costs such as land acquisition, construction, financing, insurance, maintenance and taxes. | | Value | Comparing investments and evaluating business strategies. | | Related Techniques | Cost Benefit AnalysisRate Of Return |
Management Accounting
This is the complete list of articles we have written about management accounting.
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