Net Present Value
“A method used in evaluating investments, whereby the net present value of all cash outflows (such as the cost of the investment) and cash flows (returns) is calculated using a given a discount rate, usually the required rate of return. An investment is acceptable if the NPV is positive. In capital budgeting the discount rate used is called the hurdle rate and is usually equal to the incremental cost of capital.”
The net present value of a project is essentially the value in today’s terms of future incomes and expenditures.