Identify all expected future cash inflows and outflows
Determine the discount rate
Convert each future cash flow to its present value using PV = CF / (1 + r)^t
Sum all present values of cash inflows
Sum all present values of cash outflows
Subtract total present value of outflows from total present value of inflows
Use NPV = Σ [CF_t / (1 + r)^t] – Initial investment
If NPV is positive, the project adds value
If NPV is negative, the project destroys value
If NPV is zero, the project breaks even