NPV Is a Value Test, Not a Vibe Check

The move: treat NPV as the value-creation test. A capital budget is a choice about scarce long-term resources. NPV works because it forces three disciplines into one number: cash, time, and risk. Cash matters because value comes from money the project actually changes, not from accounting labels alone. Time matters because a dollar next year is worth less than a dollar now. Risk matters because uncertain cash needs a higher required return than safe cash. Cash comes first The model should start with incremental cash flows: new revenue, avoided costs, tax effects, working capital, maintenance, and terminal value that happen…

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