Net Present Value (NPV) is a financial metric that refers to the difference between the present value of cash inflows and the present value of cash outflows, over a period of time. NPV is used in analyzing profitability and is an indicator of the value or magnitude of an investment.

NPV focusses on the value that an investment adds to a project. A NPV that is greater than zero indicates that the investment adds value to the project, an NPV less than zero shows that the investment does not add any value to the project, and an NPV equal to zero indicates that the project does not gain or lose from the investment. To calculate the NPV, a discount rate is also considered.

The NPV is calculated as a sum and difference of benefits and costs at varying intervals over the life of the project. The number of significant decimal places for addition and subtraction should equal the number of significant decimal places of the measured number, with the least number significant decimal places of all of the numbers added or subtracted. When a discount rate is used in the NPV calculation, multiplication and division are used to determine the discounted costs and benefits for a given time period. The smallest number of significant figures for all of the measured numbers multiplied or divided should determine the number of significant figures used in the result. There is no accurate method to specify or determine the number of significant figures to use for the result.

The Net Present Value is the sum of sum of discounted cost streams subtracted from the sum of discounted value streams. NPV is calculated by adding all of the cost and benefit streams in a time grid from today through the end of the project. The high, likely and low values are randomly sampled thousands of times to produce a distribution of their value for a given period of time. The actual value is a past value and is not included in the result. The formula is used for a standard investment analysis model, which has a value stream, Revenue (R), and two cost streams, Development Cost (D) and Maintenance Cost (M).