Net Present Value (NPV) is a financial metric used to evaluate the profitability of an investment. It calculates the difference between the present value of cash inflows and the present value of cash outflows over a specific period. A positive NPV indicates that the investment is expected to generate more money than it costs, making it a desirable option. To calculate NPV, future cash flows are discounted back to their present value using a specific discount rate, often reflecting the cost of capital or required rate of return. This method helps investors and businesses make informed decisions about where to allocate resources effectively.