Full explanation
NPV = sum of all future cash flows discounted to present value, minus the initial investment. Formula: NPV = Σ [Cash flow_t / (1 + r)^t] - Initial investment. Where r = your hurdle rate (minimum acceptable return). If NPV > 0: investment generates returns above your hurdle rate — accept. NPV < 0: returns below hurdle rate — reject. NPV = 0: exactly meets hurdle rate. Practical use: evaluating business investments, property purchases, solar panel installations, or any decision with upfront cost and future returns. Compare projects by NPV to prioritize capital allocation.