Net Present Value (NPV)
Present value of inflows minus the initial cost.
What is Net Present Value (NPV)?
The value created by an investment in today's dollars. Positive NPV means the project earns more than the required rate of return. It embeds the time value of money - a dollar today outranks a dollar next year.
Net Present Value (NPV): a worked example
$1.2M of discounted inflows on a $1M investment is a $200,000 NPV.
More terms in Valuation & Analysis
Market Capitalization
Share price times shares outstanding - the equity value of a company.
Earnings Per Share (EPS)
Net income attributable to each share of common stock.
Price-to-Earnings (P/E) Ratio
Price per share divided by earnings per share.
Dividend Yield
Annual dividends per share divided by share price.
Payout Ratio
The share of earnings paid out as dividends.
Book Value
Assets minus liabilities - the accounting value of equity.
Free Cash Flow
Operating cash flow minus capital expenditures.
EBITDA
Earnings before interest, taxes, depreciation, and amortization.