Net Present Value (NPV) takes this concept a step further and describes the difference between the project’s cash value now and in the future.

You can use NPV as a profitability indicator. A larger NPV indicates a more profitable project.

• Positive NPV (NPV > 0): the project is profitable. The anticipated financial gains outweigh your present-day investment.
• Negative NPV (NPV < 0): the project is not profitable. Expenses are more significant than returns, so you will likely lose money on this project.
• A net present value of 0 is unrealistic. It essentially means there will be no return on your investment, but you won’t lose money either.