Net Present Value (NPV) is a financial metric that is commonly used in investment appraisal to evaluate the profitability of an investment. It takes into account the time value of money, by discounting future cash flows back to present value. The formula for calculating NPV is simple: NPV = Σ (Cash flow t / (1+r)^t), where t is the time period, r is the discount rate, and Cash flow t is the cash flow at time t. A positive NPV indicates that an investment is expected to generate more cash flows than the initial investment, making it a profitable venture. On the other hand, a negative NPV suggests that the investment may not be financially viable. In financial decision making, NPV is a crucial tool as it helps in comparing different investment opportunities and selecting the most value-creating projects. By considering the time value of money, NPV provides a more accurate picture of the potential returns of an investment, helping businesses make informed decisions.