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What is Net Present Value?

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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.
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 Analysis
Rate Of Return

Management Accounting

This is the complete list of articles we have written about management accounting.
Baseline
Benchmarks
Best In Class
Bottleneck
Complexity Cost
Cash Conversion Cycle
Cycle Time
Debottlenecking
Compliance Rate
Employee Productivity
Contribution Margin
Forecasting
Cost Benefit Analysis
Labor Productivity
Cost To Company
Lead Time
Run Rate
Statistical Analysis
Demand Forecasting
Takt Time
Efficiency Formula
Throughput
Internal Benchmarking
Lifecycle Cost Analysis
Machine Efficiency
Net Present Value
Productivity Formula
Productivity Rate
Quantification
Scalability
Target Costing
Theory Of Constraints
Throughput Accounting
Total Cost Of Ownership
Variance Analysis
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Management Accounting

A list of management accounting examples.

Theory Of Constraints

A management approach that examines the constraints that are holding an organization back.

Target Costing

A definition of target costing with examples.

Continuous Improvement

A definition of continuous improvement with examples.

Takt Time

An overview of takt time with calculation formula and example.

Lead Time vs Cycle Time

The difference between lead time and cycle time explained with an example.

Productivity Formula

How to calculate productivity with 3 examples.

Complexity Cost

A definition of complexity cost with examples.

Run Rate

The definition of run rate with calculation examples.

Managerial Economics

The definition of managerial economics with examples.

Decision Making

A list of decision making techniques.

Abilene Paradox

The observation that groups may make collective decisions that are viewed as wrong or irrational by each individual member of the group.

Decision Making Process

A complete guide to the decision making process.

Rational Thought

The difference between rational thought and logic.

Uncertainty

The common types of uncertainty in decision making and strategy.

Information Costs

A definition of information costs with examples.

Reverse Brainstorming

A definition of reverse brainstorming with examples.

Decision Fatigue

The definition of decision fatigue with examples.

Devils Advocate

Taking a position that you do not necessarily agree with for the purposes of argument.

Paradox Of Choice

The definition of paradox of choice with examples.
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