Net present value
The present value of all a project's future flows less what was invested in it.
Formula
NPV = \sum_{t} \frac{CF_t}{(1 + r)^t} - I_0The initial investment, and a rate that reflects the risk of this particular project rather than the company's average.
How to read the number
A positive figure means the project earns more than the required return; a negative one means it is cheaper not to start.
When the metric lies
The result is sensitive to the rate: the same project changes sign on a moderate revision of it, and the rate itself is never observed.
Also known as: npv