In the context of investment analysis, what does a negative NPV indicate?

A negative Net Present Value (NPV) indicates that the present value of an investment’s cash inflows is less than the present value of its cash outflows. This essentially means that, after accounting for the time value of money, the investment is not generating enough returns to cover its costs and is expected to result in a loss.

When evaluating potential investments, a positive NPV suggests that the project is expected to add value and generate wealth for investors, while a negative NPV signifies that the investment is likely to result in a detriment to shareholder value. Therefore, choosing to undertake an investment with a negative NPV would indicate a potential loss, as it does not meet the necessary returns relative to the investments' costs and risks.