The net present value (NPV) method can be a very good way to analyze the profitability of an investment in a company, or a new project within a company.

Net present value and the profitability index are helpful tools that allow investors and companies make decisions about where to allocate their money.

Net present value (NPV) is used to estimate the profitability of projects or investments. You can calculate NPV in two ways using Microsoft Excel.

Definition: The net present value (NPV) of an investment is the present (discounted) value of future cash inflows minus the present value of the investment and any associated future cash outflows ...

The net present value (NPV) method can be a very good way to analyze the profitability of an investment in a company, or a new project within a company.

A net present value calculation is a good way to identify the direct cost comparison of leasing versus buying a car, for example.

This is called the time value of money. But how exactly do you compare the value of money now with the value of money in the future? That is where net present value comes in.

How net present value works The basic tenet of the net present value method is that a dollar in the future is not worth as much as one dollar today.