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In capital budgeting, the Net Present Value is the sum of the discounted future cash flows of an investment.
NPV = - I(0) + I(1)/(1+i) + I(2)/(1+i)² + … + I(n)/(1+i)^n
Where: I(0) : Initial Investment I(1) : Cash flow of the first period. I(2) : Cash flow of the second period. I(n) : Cash flow of the nth period. i : discount rate
See also:
Capital Budgeting
Internal Rate of Return
Discussion