Net present value/Definition

Net Present Value (NPV) is a time based financial analysis tool used to make capital purchase decisions.

NPV compares the financal return of spending money to make money (e.g. a capital investment) WITH retaining the money in a no risk interest generating account over time. The purpose of NPV is to determine the best wealth creation opportunity. A positive NPV means spending the money will create more financial wealth than just allowing it to gain interest.