Net Present Value (NPV) is a key tool for evaluating project profitability. NPV calculates the present value of a series of future cash flows, discounted by time and risk. If the total is positive, the project is financially viable; if negative, it’s not worth pursuing. This chapter breaks down the logic, math, and real-world implications of NPV to help product leaders make smarter capital allocation decisions.

Two critical dimensions are often overlooked in product business models: time and risk. These shape the opportunity cost of capital - the value of the best alternative forgone. We break down simple vs. compound interest, explain why investors demand a risk premium, and show how timing and uncertainty affect real-world investment choices. Up next: Net Present Value and strategic capital use.

Blending Goods and Services Economics explores the unit economics behind smart tangibles—physical products enhanced by software, sensors, and connectivity. This series, part of the Smart Tangibles book, dives into production economics, cost accounting, and managerial strategies for building viable, scalable business models. Learn how companies like Apple and Tesla balance costs, value, and risk to create powerful economic engines.

Can your product idea become a sustainable business? This chapter introduces contribution margin and break-even analysis — two essential concepts for evaluating the viability of smart, manufactured products. Using a simplified model that assumes one-time transactions, we explore how price, cost, and sales volume interact. It’s a first step toward understanding smart product economics — before diving into recurring revenue, services, and platforms.