what is the net present value rule 
the net present value rule is the idea that company managers and investors should only invest in projects or engage in transactions that have a positive net present value npv they should avoid investing in projects that have a negative net present value it is a logical outgrowth of net present value theory investopedia theresa chiechiunderstanding the net present value ruleaccording to the net present value theory investing in something that has a net present value greater than zero should logically increase a company s earnings in the case of an investor the investment should increase the shareholder s wealth companies may also participate in projects with neutral npv when they are associated with future intangible and currently immeasurable benefits or where they enable ongoing investments to happen although most companies follow the net present value rule there are circumstances where it is not a factor for example a company with significant debt issues may abandon or postpone undertaking a project with a positive npv the company may take the opposite direction as it redirects capital to resolve an immediately pressing debt issue poor corporate governance can also cause a company to ignore or miscalculate npv 