Meaning and calculation
NPV is the net present value of a project. In an analytical calculation, all expected cash flows, including costs, are brought to one point in time and summed with their signs. A positive value means that the calculated benefits exceed the costs at the selected rate and under the model’s other assumptions.
If 90 thousand roubles must be invested today and a single payment of 110 thousand is expected in one year, at a 10% discount rate the NPV is 10 thousand roubles. This is a conditional estimate: if the payment does not arrive or costs increase, the actual result will be different.
Limits of interpretation
NPV is not accounting profit and is not a promise of income. It depends on timing, risk and the completeness of the cash flows. Projects should be compared on a consistent basis, taking capital constraints and differences in scale into account. A positive NPV does not remove operating risks or replace a check of how realistic the project forecasts are. Related reading: [discounted cash flow](/guides/discounted-cash-flow/), [discounting](/glossary/diskontirovanie/), [IRR](/glossary/irr/) and [payback period](/glossary/srok-okupaemosti/).