Present value of future cash flows minus initial cost
The net present value of an investment is the present value of a project's future cash flows minus its initial cost. True. 6. The majority of capital budgeting projects are short-lived projects. False. 7. Information generation develops three types of data: internal financial data, external economic and political data, and non-financial data. True. 8. The profitability index is the least How this formula works. Net Present Value (NPV) is the present value of expected future cash flows minus the initial cost of investment. The NPV function in Excel only calculates the present value of uneven cashflows, so the initial cost must be handled explicitly.