Harvard Business Review

MARCH 27, 2014

Ideas with positive discounted cash flows get investment. Big bets don’t make it through the every-idea-has-to-be-a-winner screen because it’s very hard to create reliable, detailed financial projections for the types of uncertain ideas that have the promise of big returns. Innovation Project management'

Venture Capitalist 9

Venture Capitalist Discounted Cash Flow Parcell Project 9

Harvard Business Review

OCTOBER 16, 2013

Yet the decision to green-light a project is usually based solely on “expert opinions” — in other words, executives’ intuition supplemented by standard regression analysis. Most companies – including the movie studios in Hollywood – over-rely on basic tools like discounted cash flow and net present value.

Discounted Cash Flow 8

Discounted Cash Flow Net Present Value Comparison Tools 8

Harvard Business Review

JUNE 8, 2018

Business students have traditionally considered net present value, payback period, and hurdle rates as necessary tools to determine which project to select. Digital companies, in contrast, chase risky projects that have lottery-like payoffs. Digital companies, in contrast, chase risky projects that have lottery-like payoffs.

Report 8

Report GAAP Net Present Value CFO 8

Harvard Business Review

OCTOBER 20, 2014

Combining these creates a P&L and a projection, which through a discounted cash flow analysis yields an NPV, which can be used to assess valuation. On the cost side, what’s the sourcing cost, the production cost, and the distribution cost? Which of these are ongoing, and which are one-off?

Discounted Cash Flow 8

Discounted Cash Flow P&L NPV EBITDA 8

Harvard Business Review

MARCH 10, 2011

Estimating the rate at which to discount the cash flows — the cost of equity capital — is an integral part of the exercise, and the choice of rate has a significant effect on estimates of a project's or a company's value. billion.

CAPM 14

CAPM Cost Discounted Cash Flow Cost of Capital 14

Harvard Business Review

MARCH 10, 2011

Many are deeply uncertain about which initiatives they should fund — and one root of this indecision is a general lack of confidence in the cost of capital projections they are using to make the call. Fully 79 percent of companies, including 91 percent with annual revenues greater than $1 billion, use discounted cash flow techniques.

Cost of Capital 13

Cost of Capital CAPM Cost Discounted Cash Flow 13