**📅 Date:** ➤ ⌈ [[2025-07-18-Fri〚Net Present Value (NPV)〛]]⌋ **💭 What:** ➤ NPV is the Present value of expected future cash flows - the initial investment ➤ Very Important: Notes p3 - Fri 18 Jul, 2025 ➤ NPV > 0 Earning ... **👀 Snap:** ➤ 回顾 DCF potentially on July 8 Discounted Cash Flow 贴现公式 ➤ NPV reflects the **net value created today** by investing capital for future returns. ➤ ==IRR --> NPV=0 时的== - NPV measure absolute value creation - NPV: Directly estimate the dollar amount of value added - NPV --> shareholder wills increase - NPV is the most relevant matrix for financial decision making ⇩ 🅻🅸🅽🅺🆂 ⇩ **🗂 Menu**: ⌈[[✢ M O C ➣ 07 ⌈J U L - 2 0 2 5⌉ ✢|2025 - J U L- MOC]]⌋ ⌈[[✢ L O G ➢ 07 ⌈J U L - 2 0 2 5⌉ ✢|2025 - J U L - LOG]]⌋ #👾/Private ------➤ ⌈[[💰L051 -02- Return on Invested Capital (ROIC)]]⌋ ------➤ ⌈[[💰L051 -03 WACC – Weighted Average Cost of Capital 加权平均资本成本]]⌋ ------➤ ⌈[[💰L051 -04 - Review Discount Rate 贴现率]]⌋ --- ## 💰 Net Present Value (NPV) | 净现值 ### 📖 Definition ![[Pasted image 20250719213610.png]] **Net Present Value (NPV)** is the **present value of expected future cash flows** generated by an investment, **minus the initial investment cost**. > NPV = Present Value of Cash Inflows – Initial Investment --- ### 🧮 Formula ![[IMG_2073.jpeg|#left|300]] ![[IMG_2074.jpeg]] ![[Screenshot 2025-07-19 at 22.03.39.png]] --- ### ✅ Interpretation - **NPV > 0** → Investment **adds value** → Accept the project - **NPV = 0** → Investment **breaks even** - **NPV < 0** → Investment **destroys value** → Reject the project NPV reflects the **net value created today** by investing capital for future returns. --- ### **💡 Key Characteristics** - Incorporates the **time value of money** - Takes into account **all cash flows** over the project’s life - Depends on a **discount rate** that reflects the risk and opportunity cost - Used for **capital budgeting and project evaluation** --- ### **🔁 Related Terms** - **IRR (Internal Rate of Return)** - **Discount Rate** - **Capital Budgeting** - **Payback Period** - **Profitability Index (PI)** --- ![[IMG_2005.jpeg|#left|300]]