Net present value (NPV) is a method of evaluating the profitability of a project by comparing the present value of the project’s cash inflows to the present value of the project’s cash outflows. When there is no discount rate, the net present value of a project is simply the sum of the project’s cash inflows minus the sum of the project’s cash outflows.
NPV is a useful tool for making investment decisions, as it allows investors to compare the profitability of different projects on a level playing field. NPV is also used by businesses to evaluate the profitability of new projects and to make decisions about whether or not to invest in new projects.