If n is the number of cash flows in the list of values the formula for NPV is. After the cash flow for each period is calculated the present value PV of each one is achieved by discounting its future value see Formula at a periodic rate of return the rate of return dictated by the market. A positive net present value indicates that the projects rate of return exceeds the discount rate.
Net present value NPV is the difference between the present value of cash inflows and outflows of an investment over a period of time.
NPV is similar to the PV function present value. Net present value is a tool of Capital budgeting to analyze the profitability of a project or investment. The NPV formula shows the present value of all cash flow streams over periods of time usually. Put simply NPV is used to work out how much money an investment will generate compared with the cost adjusted for the time value of money one dollar today is worth more than one dollar in the future.