The NPV function can evaluate the value of an investment over time through incoming and outgoing cash flows.

Question

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The Net Present Value (NPV) function is commonly used to evaluate the profitability of an investment. It takes into account the incoming cash flows (revenues, sales, etc.) as well as the outgoing cash flows (expenses, taxes, etc.) over a period of time. The NPV function calculates the present value of all cash flows, discounted to the present day using a chosen discount rate. If the resulting NPV is positive, the investment is considered profitable, and if it is negative, it is deemed not worthwhile.

The NPV Function Can Evaluate the Value of an Investment