In this episode, we explore Net Present Value (NPV), a critical financial method used to value assets and evaluate capital projects. We break down how NPV calculates the sum of all future cash flows discounted back to today's dollars, explicitly accounting for the "time value of money." Key topics covered include: • The Core Concept: Why a dollar today is worth more than a dollar tomorrow and how NPV quantifies this using a discount rate,. • The Decision Rule: Understanding why projects with a positive NPV are generally accepted as profitable, while negative NPVs suggest a loss,. • The Inputs: How cash inflows, outflows, and the chosen discount rate drive the calculation,. • Pros and Cons: A look at why NPV is preferred for wealth maximization, despite its sensitivity to input errors and reliance on accurate future predictions,. • Alternatives: A brief comparison with other budgeting methods like the Internal Rate of Return (IRR) and the Payback Period. Tune in to learn why this 19th-century concept formalized by Irving Fisher remains a staple in modern financial analysis,.