NPV (Net Present Value)

The difference between the present value of future cash inflows and outflows, discounted at a required rate of return. A positive NPV indicates an investment is expected to add value; negative NPV destroys value.

NPV rests on the time value of money: a dollar earned years from now is worth less than a dollar today. By discounting every projected cash flow at a required rate of return and summing them, NPV tells you whether a project is expected to create value (positive) or destroy it (negative).