Net Present Value (NPV)

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