NPV is the total sum of money flows accounting for interest rates.
Let's say you have a project where you have to pay for expenses every month, and get revenue every month. The sum of those is your net money flow. If it is positive, you will earn interest on that money. If it is negative, you COULD have been earning interest on that money if it was simply invested in zero risk funds.
At the end of the project, NPV is how much money you earned or spent over the life of the project compared to how much you could have earned with that money from interest instead of the project.
If you made 4% back on your investment but the interest rate is 3%, your NPV is positive. If instead, the interest rate is 5% then NPV is negative. Saving Changes...
however the most important we select the project among projects when NPV is the biggest.
BR,
Thanks for sharing the link Saving Changes...
Sergio Luis ConteHelping to create solutions for everyone| Worldwide based OrganizationsBuenos Aires, Argentina
@Joshua and @Keith has made great comments, beyound the others valuable comments too. NPV is something that is close to be unusefull in countries with volatile economies where the interest rate is not stable or hard to calculate. Saving Changes...
If a woman has to choose between catching a fly ball and saving an infant's life, she will choose to save the infant's life without even considering if there is a man on base.
