1. Net present value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows from an investment. 2. To calculate NPV, you need to identify the cash flows, determine a discount rate, and specify a time period. You then calculate the present value of each cash flow and sum them to get the NPV. 3. If the NPV is positive, the investment is expected to be profitable. If negative, it is expected to result in a loss. NPV takes the time value of money into account but requires subjective inputs that can be difficult to estimate.