Net Present Value (NPV)

NPV is the widely accepted tool for measuring the value of a mine project. It calculates the current value of the cash flows at the required rate of return of a project compared to the initial investment. By looking at the money you expect to make from an investment and converting the returns into today’s dollars, you can decide whether the project is potentially worthwhile. 

NPV is accepted for two major reasons- it considers the time value of money, and provides a concrete number that managers can use to easily compare an initial outlay of cash against the present value of the return. The calculation takes the sum of the present value of cash flows, both positive and negative, for each year associated with the investment, and discounted so that it’s expressed in today’s dollars.

Source: Prospector