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Net Present Value: What it actually means?
Net present value is a core financial metric that discounts all expected future cash inflows and outflows of a project back to today using an appropriate discount rate, and nets them to show whether the project creates or destroys value. Consultants use NPV to compare initiatives of different size and duration on a like-for-like basis, test key assumptions and set investment thresholds. Because NPV is sensitive to growth, margin, timing and discount-rate assumptions, good practice is to run scenarios and document all inputs so boards, auditors or funders can follow the logic. A positive NPV does not guarantee success, but it is a strong indicator that the project aligns with shareholder value creation.
