What is a 'Net Present Value Rule'
A net present value rule is a rule stating that an investment should be accepted if its net present value is greater than zero and rejected otherwise. According to the theory of net present value (NPV), participating in a positive NPV project will increase firm or shareholder wealth.
BREAKING DOWN 'Net Present Value Rule'
While most firms follow the net present value rule, there are some situations where the theory is abandoned. If the company is pressured by large debt payments, some positive NPV projects will be rejected. In this case, the initial capital will go towards servicing the debt instead of investing in new projects.
If a firm has poor corporate governance, managers may ignore the net present value rule. In order to appear active, management may take on negative NPV projects to give shareholders the illusion of ongoing corporate investment.

Net Present Value  NPV
Net Present Value (NPV) is the difference between the present ... 
Profitability Index Rule
A regulation for evaluating whether to proceed with a project ... 
Adjusted Present Value  APV
The Net Present Value (NPV) of a project if financed solely by ... 
Retained Cash Flow  RCP
A measure of the net change in cash and cash equivalent assets ... 
Net Present Value Of Growth Opportunities ...
A calculation of the net present value of all future cash flows ... 
Replacement Chain Method
A capital budgeting decision model that is used to compare two ...

Fundamental Analysis
Calculating Net Present Value at Different Points Using Excel
Calculating the net present value (NPV) of your investment projects using Excel. 
Economics
Capital Budgeting: Which is Better, IRR or NPV?
Using internal rate of return and net present value for capital budgeting evaluations often end in the same result. But there are times when using NPV to discount cash flows makes more sense. 
Personal Finance
An Introduction To Capital Budgeting
We look at three widely used valuation methods and figure out how companies justify spending. 
Fundamental Analysis
Calculating the Internal Rate of Return Using Excel
The internal rate of return on investments is explained and illustrated in different investment scenarios. 
Options & Futures
Understanding Net Present Value
Learn how this value is used to determine the worth of a project. 
Forex Education
Time Value Of Money: Determining Your Future Worth
Determining monthly contributions to college funds, retirement plans or savings is easy with this calculation. 
Investing
What's a Hurdle Rate?
Hurdle rate has two meanings. In the business world, a business typically makes a decision on a capital project based on the net present value approach. To determine the net present value, the ... 
Investing
Understanding The Discounted Payback Period
It’s similar to a simple payback, but a discounted payback period accounts for money’s time value. It’s a more precise estimate of when investors will recover their total investment. 
Investment Firms Could Be the Losers in New Fed Rule
A new Fed rule attempts to prevent another financial crisis by rewriting financial contracts between investment firms and big banks. 
Fundamental Analysis
Calculating the Present Value of an Annuity
The present value of an annuity is the current, lump sum value of periodic future payments as calculated using a specific rate.

What is the formula for calculating net present value (NPV) in Excel?
Understand how net present value is used to estimate the anticipated profitability of projects or investments and how to ... Read Answer >> 
What are the disadvantages of using net present value as an investment criterion?
While net present value (NPV) calculations are useful when you are valuing investment opportunities, the process is by no ... Read Answer >> 
What is the formula for calculating net present value (NPV)?
Learn about the formula for net present value (NPV) and how this calculation is used in capital budgeting to determine which ... Read Answer >> 
Do you include working capital in net present value (NPV)?
Discover why it is important to include changes to working capital as a component in calculating the net present value (NPV) ... Read Answer >> 
What's the difference between net present value and internal rate of return? How ...
Both of these measurements are primarily used in capital budgeting, the process by which companies determine whether a new ... Read Answer >> 
How do you use internal rate of return to calculate a capital budget?
Learn about how the internal rate of return is used in the creation of a capital budget along with net present value and ... Read Answer >>