The net present value (NPV) method can be a very good way to analyze the profitability of an investment in a company, or a new project within a company.

By discounting every future $3,000 cash flow back at a rate of 10%, and subtracting the initial cash outlay of $15,000, we arrive at a net present value of $3,433.70 for this project.

Consider for the time value of money -- that is, the future value cash flows -- when making capital investment decisions. The NPV method uses a compound rate of return, or present value interest ...

Companies using the payback period method typically choose a time horizon – for example, 2, 5 or 10 years. If a project can "pay back" the startup costs within that time horizon, it's worth ...

These don't mean the exact same thing, but for stocks, using the present value of earnings is a reasonable method. Example stock valuation using the discounted cash flow model ...

How to Use Net Present Value (NPV) Let's say you're contemplating setting up a factory that's going to need initial funds of $250,000 during the first year. This is an investment so it's a cash ...

Example of Net Present Value of Growth Opportunities (NPVGO) For example, assume that the intrinsic value of a company's stock is $64.17.

This is called the time value of money. But how exactly do you compare the value of money now with the value of money in the future? That is where net present value comes in.

By discounting every future $3,000 cash flow back at a rate of 10%, and subtracting the initial cash outlay of $15,000, we arrive at a net present value of $3,433.70 for this project.