net present value
What net present value means in Business A-Level, as defined for AQA.
Definitions of net present value
Exam boards and our study guides word this term in slightly different ways. Learn the version your board uses.
Check what you remember
Read the wording for your board, then hide it and explain net present value in your own words. Rough notes are fine. This is a self-check, with no mark or grade.
Reference: AQA
Multiplies each future flow by the discount factor supplied, adds them and takes off the outlay, so a positive figure in pounds means the project beats that discount rate.
Each future flow multiplied by its own discount factor and summed, then the outlay subtracted, giving a money figure; positive means proceed at that discount rate.
A method that discounts future cash flows back to today's money.
Topics that use net present value
- Analysing strategic options: investment appraisal (AQA A-Level)
- Annex: quantitative skills in business (AQA A-Level)
- Assessing innovation (AQA A-Level)
Related terms
- average rate of return
- benchmarking
- analysis
- averages
- axes and scales
- base year
- break-even charts
- break-even output
Using net present value in the exam
Check the command word and mark scheme for your exact question. After comparing your explanation with the reference, use the term in an answer on the linked topic. This practice does not predict an exam mark.
Practise Business questions
Create a free account to answer exam-style questions on this topic and get feedback on your answers.
A week of Premium from your first lesson · Then the free plan continues · No card, no charge