Net Present Value (NPV)
An investment appraisal method that discounts all future cash flows back to their present value using a discount rate, t...
Formula
NPV = Σ(Discounted Cash Flows) − Initial Investment
Real World
When HS2 planners assessed the rail project, NPV analysis was used to discount decades of future economic benefits back to today's value to judge whether the £100bn+ cost was justified.
Exam Focus
A positive NPV means accept; always state this conclusion explicitly — do not leave the examiner to infer it.
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