Net present value and the profitability index are helpful tools that allow investors and companies make decisions about where to allocate their money for the best return.

Net present value (NPV) represents the difference between the present value of cash inflows and outflows over a set time period. Knowing how to calculate net present value can be useful when ...

The discount rate is the interest rate used to calculate net present value (NPV). It represents the time value of money. NPV can help companies determine whether a proposed project may be profitable.