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Net Present Value (NPV) is a financial concept that represents the difference between the present value of cash inflows and outflows of an investment project. It is used to assess the profitability of a potential investment by discounting future cash flows back to their present value. To calculate NPV, one needs to estimate the future cash flows expected from the investment and apply a discount rate to these cash flows. If the NPV is positive, it means the investment is expected to generate more returns than the initial cost, making it a worthwhile investment. On the other hand, a negative NPV indicates that the project may not be profitable. NPV is a valuable tool for businesses and individuals to evaluate the feasibility of investment projects and make informed financial decisions. By comparing the NPV of different projects, one can prioritize investments that offer the highest potential returns. Overall, understanding NPV is essential for effective investment evaluation and financial planning.