Net Present Value (NPV)

Net Present Value (NPV)

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used in capital budgeting and investment planning to analyze the profitability of an investment or project. It is assumed that an investment with a positive NPV will be profitable, and an investment with a negative NPV will result in a net loss. 

Pros

Universally meaningful to any party reviewing an energy investment

Cons

NPV is derived from many different inputs: garbage in = garbage out.

Real Talk

We have found this to be the single most important investment metric. If positive, a project is worth building; if negative, then find another way.

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