Metrics & KPIsNet present value (NPV)
Definition
Net present value (NPV) is a standard method for the financial appraisal of long-term projects. Used for capital budgeting, and widely throughout economics, it measures the excess or shortfall of cash flows, in present value (PV) terms, once financing charges are met. <a href="http://en.wikipedia.org/wiki/Net_present_value">Source</a>
Formula
(Rt) Divided by (1+i)t , where t - the time of the cash flow i - the discount rate (the rate of return that could be earned on an investment in the financial markets with similar risk.) Rt - the net cash flow (the amount of cash, inflow minus outflow) at time t (for educational purposes, R0 is commonly placed to the left of the sum to emphasize its role as (minus the) investment).
Tags
project, cash, cash flow, capital, budget