Net Present Value (NPV)

The net present value (NPV) is a method of valuation used to assess the current worth of future cash flows linked to an intangible asset. When applying the NPV to intangible assets, the method involves estimating the expected cash flows an asset can be expected to generate over its useful life and discounting them back to the present using a discount rate. By doing this, the NPV calculates the time value of money and provides a measure of the asset’s value in present dollar value terms. This allows CEOs to check if an investment in an intangible asset, such as a technology or in a brand refresh, is likely to generate positive net cash inflows, helping management in their decision-making and resource allocation.