Net present value/Definition

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A definition or brief description of Net present value.

Net Present Value (NPV) is a time based financial analysis tool used to make capital purchase decisions.

NPV compares the finances of spending money to make money (e.g. a capital investment) WITH retaining the money in a no risk interest generating account over time, 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.