The NPV formula, or Net Present Value formula, is a financial equation used to determine the current value of a series of future cash flows, discounted back to their present value. It helps investors and businesses assess the profitability of an investment by considering both the magnitude and timing of cash flows, factoring in a discount rate that reflects the opportunity cost of capital. Understanding the NPV formula is crucial when making decisions about investments, as it allows for comparison between different projects or investments on a like-for-like basis.
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