<Table> <Tr> <Td> </Td> <Td> This article may be too technical for most readers to understand . Please help improve it to make it understandable to non-experts, without removing the technical details . (November 2014) (Learn how and when to remove this template message) </Td> </Tr> </Table> <Tr> <Td> </Td> <Td> This article may be too technical for most readers to understand . Please help improve it to make it understandable to non-experts, without removing the technical details . (November 2014) (Learn how and when to remove this template message) </Td> </Tr> <P> In finance, the net present value (NPV) or net present worth (NPW) is a measurement of profit calculated by subtracting the present values (PV) of cash outflows (including initial cost) from the present values of cash inflows over a period of time . Incoming and outgoing cash flows can also be described as benefit and cost cash flows, respectively . </P> <P> Time value of money dictates that time affects the value of cash flows . For example, a lender may offer 99 cents for the promise of receiving $1.00 a month from now, but the promise to receive that same dollar 20 years in the future would be worth much less today to that same person (lender), even if the payback in both cases was equally certain . This decrease in the current value of future cash flows is based on the market dictated rate of return . More technically, cash flows of nominal equal value over a time series result in different effective value cash flows that make future cash flows less valuable over time . If for example there exists a time series of identical cash flows, the cash flow in the present is the most valuable, with each future cash flow becoming less valuable than the previous cash flow . A cash flow today is more valuable than an identical cash flow in the future because a present flow can be invested immediately and begin earning returns, while a future flow cannot . </P>

What is net present value in simple terms