The NPV (Net Present Value) formula is a financial metric that calculates the present value of cash flows expected from an investment, subtracting the initial investment cost. This formula helps determine the profitability of an investment by considering the time value of money, which means that cash received in the future is worth less than cash in hand today. The NPV formula is crucial for making informed financial decisions, as it provides a clear picture of how much an investment is expected to earn or lose over time.
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