The difference between the present value of the future cash flows from an investment and the amount of investment. Present value of the expected cash flows is computed by discounting them at the required rate of return.
For example, an investment of $1,000 today at 10 percent will yield $1,100 at the end of the year; therefore, the present value of $1,100 at the desired rate of return (10 percent) is $1,000. The amount of investment ($1,000 in this example) is deducted from this figure to arrive at net present value which here is zero ($1,000-$1,000).
Use this term in a sentence
Sometimes it is better to look at the net present value if you want to see what your net worth really is.
I suggested he perform a net present value calculation to understand how the deal in the future could be quantitatively analyzed today.
The net present value of the company was soaring and could stand up to the best companies out there, which was cool.