Capital Budgeting: Net Present Value (NPV) andHurdel Cost of Capital Rates

Net Present Value (NPV) in Corporate Finance NPV is the gold standard for capital budgeting. It answers a fundamental question: *Will investing $X in this project today return more cash than storing it in risk-free options?*

The Formula & Hurdle Rate Because a dollar today is worth more than a dollar tomorrow, future cash returns must be discounted. The discount rate represents your **cost of capital** (or hurdle rate). * If **NPV > 0**: The project increases company value. Accept it. * If **NPV < 0**: The project destroys capital value. Reject it.