Finance
Net Present Value (NPV) is a financial metric that calculates the difference between the present value of cash inflows and the present value of cash outflows for an investment, using a specified discount rate. In simpler terms, NPV tells an investor what a future stream of earnings is worth today after accounting for the time value of money and cost of capital. For a solar project, one would discount future cash flows from electricity sales or savings (and consider upfront costs, O&M expenses, etc.) to see if the project creates value (positive NPV) or not (negative NPV). A positive NPV indicates that the expected returns exceed the costs (at the given discount rate), making the project financially attractive. For Energea investors, NPV is the primary metric we use to price shares in our portfolios. We calculate the NPV of future cash flows from our solar projects and use that to determine the share price.