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Net Present Value

Net present value (NPV) is a calculation to find the current value of an investment. It's the difference between total discounted cash flow and a current investment. If the calculation is positive, it means the current investment is probably a good one. If the calculation is negative, it means the opposite. Businesses need access to cash flow figures to calculate NPV.

What Small and Midsize Businesses Need to Know About Net Present Value

SMBs use NPV because, unlike some larger companies, they can suffer damaging consequences if they make a bad investment (for example, a small company that invests in the wrong technology might end up losing money and going out of business). Smaller businesses can also use NPV to make strategic decisions about assets like equipment and whether these assets will produce favorable outcomes.

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