SIX SIGMA Glossary: Net Present Value (NPV)

The Net Present Value (NPV) is used to compare the financial benefits of long-term projects that have different cash flows stretching over several years. The projected future incomes and outgoings are converted to today's value using an assumed 'discount rate' to allow for the 'time value of money'.

The formula is:

The NPV is used in Six Sigma projects. Another important financial measures is the ROI.

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