What is it used for: Determines the total amount of a future cash flow, discounted to its present value.

How it works: The present value of all future cash flows is calculated, minus the initial investment.

Calculation: Add the cash flows discounted at a chosen interest rate, then subtract the initial principal.

Use: Useful for assessing the profitability of investment projects.

Formula: NPV = Σ (Cash Flows / (1 + Rate)^n) - Initial Investment.