**Net present value**(

**NPV**) is determined by

**calculating**the costs (negative cash flows) and benefits (positive cash flows) for each period of an investment. The period is typically one year, but could be measured in quarter-years, half-years or months.

**NPV**is the sum of all the discounted future cash flows.

Similarly, what does net present value tell you?

**Net present value**(

**NPV**) is the difference between the

**present value**of cash inflows and the

**present value**of cash outflows over a period of time.

**NPV**is used in capital budgeting to analyze the profitability of a projected investment or project.

What does it mean if NPV is 0?

So a negative or

**zero NPV does**not indicate “no value.” Rather, a**zero NPV**means that the investment earns a rate of return**equal**to the discount rate. If you discount the cash flows using a 6% real rate and produce a $0**NPV**, then the analysis indicates your investment would earn a 6% real rate of return.