Overview: Net Present Value | ||
Function | ||
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 |