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Term Definition

The net present value (NPV) is the current value of an amount of money in the future, as if it existed today. A dollar today is worth more than a dollar in the future, since that dollar could be earning an interest rate when invested today. We calculate the present value of a future dollar by discounting it.

Net present value = Future value / (1 + Discount rate) ^ Number of years from today

Author - Nick Kraakman
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