Net present value (NPV) is a financial analysis technique that measures the present value of a future stream of cash flows. In simpler terms, it helps determine the profitability of an investment by calculating the difference between the present value of its future cash inflows and outflows.
NPV is widely used in business and investment decision-making. It allows investors to compare different investment opportunities and make informed choices. The concept originated in the 1930s when economists began to develop methods for evaluating long-term investment projects.