Net Present Value (NPV)

A financial metric that calculates the present value of all future cash flows associated with an investment or lease, discounted at a specific rate. Example: A Kenyan logistics firm evaluates whether to lease or buy a truck. Buying costs KES 4,000,000 upfront. Leasing costs KES 120,000 monthly for 4 years. Using NPV at a 12% discount rate, the present value of lease payments is KES 3,640,000 — making leasing the better financial option.