Net present value (NPV) is a financial metric used to assess the profitability of a project or investment. It represents the present value of future cash flows generated by a project, discounted back to the present using a specified discount rate. However, there are scenarios where it may be necessary to calculate NPV without using a discount rate.
Calculating NPV without a discount rate can be useful when comparing projects with different lifespans or when the time value of money is not a significant factor. For example, if a company is evaluating two projects with equal upfront costs and equal annual cash inflows over five years, calculating NPV without a discount rate would provide a straightforward comparison of their profitability.