The sum of an investment's expected future cash flows, discounted to today's money, minus the money put in. Positive means the investment is expected to create value, on the stated assumptions. The caveat is the substance.
An NPV is not a fact about a project. It is a compressed argument, and the compression hides where the argument is weakest. Decision-makers who read only the headline number are approving the compression, not the case.
Last reviewed 3 July 2026 · Free and ungated
Selected senior operators who have approved and regretted investment cases can show you where this one bends, before budget is committed.
Challenge the assumptions before committingNet present value discounts each expected future cash flow back to present-day terms using a chosen discount rate, then subtracts the initial investment. A positive NPV says the project is expected to return more than the organisation's threshold rate; a negative one says the capital is expected to do better elsewhere. It is the standard finance-theory yardstick for investment appraisal.
The useful question is not what the NPV is but where it comes from. Ask for the composition by year: if most of the value sits in years four onwards, or in a terminal value, the case rests on the least knowable part of the forecast, and a small change to a growth or terminal assumption swings the answer. Ask what discount rate was used and what happens two points either side. Ask which single assumption, if wrong, turns the NPV negative. A case that cannot answer those three questions has not been prepared for a decision; it has been prepared for approval.