Calculation of NPV 
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Net Present Value 
Traditional valuation methodology: Summary and Calculation of NPV. Abstract 
The Net Present Value (NPV) of an investment (project) is the difference between the sum of the discounted cash flows which are expected from the investment and the amount which is initially invested. It is a traditional valuation method (often for a project) used in the Discounted Cash Flow measurement methodology, whereby the following steps are undertaken:
The intermediate result is called: Present Value (PV).
The end result is called: Net Present Value (NPV).
So NPV is an amount that expresses how much value an investment will result in. This is done by measuring all cash flows over time back towards the current point in present time.
If the NPV method results in a positive amount, the project should be undertaken.
Although NPV measurement is widely used for making investment decisions, a disadvantage of NPV is that it does not account for flexibility / uncertainty after the project decision. See Real Options for more information regarding dealing with this in valuation.
Book: S. David Young, Stephen F. O'Byrne  EVA and ValueBased Management: A Practical Guide to Implementation  Book: Aswath Damodaran  Investment Valuation: Tools and Techniques for Determining the Value of Any Asset  Book: James R. Hitchner  Financial Valuation: Applications and Models  Compare with Net Present Value: Internal Rate of Return  Payback Period  CostBenefit Analysis 
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