Glossary › Money and tax
Net present value (NPV)
Today's value of money you will receive later, given a discount rate.
A dollar next year is worth less than a dollar today, so each future amount is divided down by the discount rate for every period it is away. NPV adds the discounted amounts up. A positive NPV on an investment means it earns more than the rate.
Like the spreadsheet function, Ratio discounts every value you list, starting from the first period.
In Ratio
| You type | Ratio shows |
|---|---|
npv(10%, 100, 200, 300) | 481.5928 |