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Net Present Value

Definition of 'Net Present Value'

A figure which represents the profitability of a project. It shows this by calculating the total of future cash inflows from a project, less cash outflows, inflation, and/or a required rate of return.

Net Present Value (NPV) = Present Value (PV) - Amount Invested.

It is generally accepted that if the Net Present Value of a project is positive, then it should be carried forward, whereas if it is negative, then it should not.

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