Predict Profitability: Calculating a project’s NPV will help an investor estimate how much profit it will generate. 
 

Future Money’s Worth: NPV considers inflation to help an investor understand money’s worth in the present and future. 
 

Helps Plan Investment: NPV helps an investor understand the opportunity cost of an investment, allowing investors to plan for the future.
 

Provides Comprehensive Analysis: NPV can account for all types of cash flows over the life of the project, which include initial investment costs, periodic inflows (revenues), ongoing operating costs, and terminal cash flows. 

Step 1: Input Initial Investment: The initial investment is the cost you bear at the project’s onset or investment expenditure. Enter this amount with a minus sign indicating an expenditure.
 

Step 2: Enter Future Cash Flows: State the expected gross cash inflows (profits) in the respective period up to the investment’s life cycle. These cash flows may differ from year to year, depending on the project’s outcome.
 

Step 3: Set the Discount Rate: The discount rate is the cost of capital or rates of return that a firm expects to attain. This value is used to discount future cash flows up to the present value.
 

Step 4: Click 'Calculate': When identifying investment costs, the calculator determines the present values of future cash inflows. It will deduct the costs of investments to arrive at net present value.
 

Step 5: Interpret Results: Benchmark NPV values are used to evaluate capital investments. The NPV value will be positive if the investment yields more than the cost, and it will be negative in case of potential losses.

Maximising Shareholder Wealth: NPV measures how much a project will add value to the business or shareholder's wealth. A high NPV generally suggests the project is expected to generate higher profit that benefits the stakeholders and aligns with businesses' core objectives, maximising shareholder value. By choosing projects with higher NPVs, firms can ensure they invest in the most value-generating opportunities.
 

Direct Profitability Indicator: Contrary to other investment appraisal techniques, NPV generally offers a straightforward money value, which makes it easy for businesses and individuals to interpret profit. While a positive NPV means the project will return more cost than the initial investment, a higher NPV signifies even greater returns, making it more attractive.
 

Risk Management and Flexibility: You must know that projects with high NPVs offer a significant cushion against potential risks. As the cash flows are high, there is a high chance of error if certain assumptions, like discount rate or future cash flow, are inaccurate. Moreover, while calculating NPV, a high value also signifies that the project can withstand a slight change in circumstances, such as an economic downturn, and remain profitable throughout.
 

Competitive Advantage: From a business point of view, where resources are limited, investing in a project with high NPVs provides companies with the best funds and gives them a competitive edge. Also, when opting for high NPV investments and projects, businesses can grow sustainably, improve their market proposition, and reinvent profits.