Definition: The present value of all projected cash inflows minus the present value of all projected cash outflows, using a specified discount rate.
Example
Projected receipts have a present value of $120,000 and the initial investment is $100,000, giving a $20,000 NPV when those are the only cash flows.
Keep the distinction clear
A positive NPV indicates a projected return above the selected discount rate under the assumptions. It does not remove forecasting risk.
Related terms
Present Value · Cash Flow · Risk
Keep studying
References: FREC Course II syllabus, Session 15
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