Defined term

Net present value

Net present value is the sum of a defined series of cash flows discounted to one valuation date using a stated discount rate and timing convention.

Also known as NPV

economics · Concept code GS-CONCEPT-073 · Last verified August 20, 2026

Definition and boundaries

Definition

Net present value is the sum of a defined series of cash flows discounted to one valuation date using a stated discount rate and timing convention.

Definition claim verification: Verified August 20, 2026

In plain language

Use Net present value only after the cash-flow perspective, timing, contract structure, included costs, and omitted items are made explicit.

What it is not

It is not payback period, profit, or a transferable ranking when assumptions differ.

Decision context

Why it matters

Results depend on cash-flow perspective, nominal or real treatment, discount rate, dates, horizon, taxes, residual value, financing, replacements, and included benefits and costs.

Decision-context claim verification: Verified August 20, 2026

Information boundary

This page provides general educational context, not a site design, production guarantee, utility determination, contract interpretation, legal opinion, tax conclusion, or individualized financial advice. Verify property, equipment, utility, jurisdiction, program, and agreement details before acting.

Concept relationships

Affects

  • Payback periodPublished conceptNet present value can affect how Payback period is evaluated

Primary sources

What to do next

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