Corporate Finance: Capital budgeting — Net Present Value (NPV)

Analysts use a comprehensive set of measures to decide whether to accept or reject a project. The most important measures are net present value (NPV) and Internal Rate of Return (IRR) as complementary decision criteria.

• payback period
• Discounted payback period
• Average rate of return (ARR)
• Profitability index (P).

Net Present Value (NVP)

Net present value is a financial metric used to assess the profitability of an investment. The metric takes into account the time value of money, which essentially means that money today is more worth than money tomorrow.

See related article about “the time value of money”