Net present value [NPV] is a means of valuing a future sum of money in today’s terms. Because of inflation, $100 in a year’s time is worth less than $100 today, so we need to discount future sums to work out their value in today’s terms. NPV is often used as a means of investment appraisal, comparing current cash outflows and future revenue inflows. If the NPV of a proposed project is positive, the project is viable and is a good use of funds. The approach requires two decisions. What will be the level of future revenue streams and cost outflows? What is the discount rate that will be used to reflect the required return on investment? See also Discounted Cash Flow and Weighted Average Cost of Capital.
« Back to Glossary IndexNet Present Value
Discover the world’s largest Glossary of Procurement terms
With over 800 Procurement specific terms (and growing) you will find everything you need to know or thought you knew about the Procurement function. Our aim is to provide you with a comprehensive list collated from the Comprara Groups hub of training and procurement consulting source materials.The Procurement Glossary has been compiled by industry expert Paul Rogers.
