NPV

NPV means Net Present Value.

Let’s say you need $10,000 in three years to pay your child’s tuition. You know you can get 12% interest on your money.

Year	Beginning Value Interest	New Value	Including Interest
1	$7,120	(.12 x $7,210) $854.40	($7,120 + $855.40) $7,974.40
2	$7,974.40	(.12 x $7,974.40) $956.93	($7,974.40 + $956.93) $8,931.33
3	$8,931.33	(.12 x $8,931.33) $1,071.76	($8,931.33 + $1,071.76) $10,003.09

 

If you wanted $10,000 in three years, you would have to put $7,120 in the bank today. So we would say at 12% interest, $7,120 is the present value of $10,000.

https://accounting.uworld.com/cpa-review/lc/accounting-dictionary/term/npv/