Net present value/Definition: Difference between revisions
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'''Net Present Value (NPV)''' is a time based financial analysis tool used to make capital purchase decisions. | '''Net Present Value (NPV)''' is a time based financial analysis tool used to make capital purchase decisions. | ||
NPV compares the | NPV compares the financal return of spending money to make money (e.g. a capital investment) '''WITH''' retaining the money in a no risk interest generating account over time. The purpose of NPV is to determine the best wealth creation opportunity. A positive NPV means spending the money will create more financial wealth than just allowing it to gain interest. | ||
Revision as of 15:12, 3 March 2009
Net Present Value (NPV) is a time based financial analysis tool used to make capital purchase decisions.
NPV compares the financal return of spending money to make money (e.g. a capital investment) WITH retaining the money in a no risk interest generating account over time. The purpose of NPV is to determine the best wealth creation opportunity. A positive NPV means spending the money will create more financial wealth than just allowing it to gain interest.