net present value (NPV) - in financial analysis of income-producing assets, the sum of all cash flow over a number of periods plus the projected sale price discounted at a rate that reflects a financial goal or criteria measure, less the original acquisition cost. If the resulting value is negative, the investment is generally unacceptable, but if positive, the investment may be considered. Consider a property that you know can be purchased today for $25,000. You are supremely confident that you can sell it for $40,000 four years from now. As a bonus, this property generates $4,000 per year of positive cash flow. If it is sold for the target amount at the end of the fourth year, the NPV arrived at by discounting the cash flows (including the net sale price) at 18%, your required risk rate, would then be $6,392. Stated another way, one could pay as much as $31,392 ($25,000 + $6,392) for the initial investment before its feasibility becomes marginal under the same assumptions. See also internal rate of return.

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