19/06/2025
How is a project's Value different from Net Present Value (NPV) in Valuation?
Many professionals working in valuation often misunderstand the distinction between these two concepts. A common mistake is calculating a project’s NPV and then mistakenly interpreting that as the project’s value - leading to errors in valuation.
The concept of project value is clearly defined in the renowned textbook Principles of Corporate Finance (commonly referred to as BMA – Brealey, Myers, and Allen):
“The difference between a project’s value and its cost is its net present value.”
In other words, NPV differs from Value (Present Value) in the initial investment cost.
