NPV is critical in business decision-making for several reasons:
Profitability Analysis: It helps determine whether a project will generate more value than its cost. Comparative Analysis: NPV allows businesses to compare multiple projects or investments and select the most profitable one. Risk Assessment: By considering the time value of money, NPV helps in assessing the risk associated with future cash flows. Long-term Planning: It aids in strategic planning and long-term investments by providing a clear picture of potential future returns.