Harvard Business Review

MARCH 23, 2017

Next time you’re deciding about a big investment, NPV can help you make a more informed decision.

Net Present Value 8

Net Present Value Present Value NPV Information 8

Harvard Business Review

JULY 15, 2014

At its core, CLV is the present value of all future streams of profits that an individual customer generates over the life of his or her business with the firm. The discount rate in the CLV equation calculates the present value of that future revenue and is tied to the current cost of money. x number of years).

Discount 14

Discount Direct Marketing Present Value Customer Loyalty 14

Harvard Business Review

JULY 9, 2012

The net present value and strategic fit of a given relationship or initial introduction in one's Lucky Network might be foggy at best, but unintended benefits often manifest for those who embrace relationships with openness.

Net Present Value 19

Net Present Value Entrepreneur Strategic Fit Open-book 19

Harvard Business Review

DECEMBER 22, 2010

Consider, for example, that the estimated net present value of obligations under the Social Security system is approximately $8 trillion. But closer inspection of government data reveals that these figures grossly understate both the current deficit and level of debt.

GDP 16

GDP Net Present Value Crisis Cost 16

Harvard Business Review

DECEMBER 23, 2013

These estimates can then help determine the Net Present Value (NPV) of the long term effect of marketing in terms of future sales. Significant cuts to TV spend as suggested by traditional econometric modeling would have reduced the net present value of the brand’s profit. customer surveys).

Marketing 15

Marketing NPV Short-term Net Present Value 15

Harvard Business Review

NOVEMBER 7, 2011

And using net-present-value estimates for "beginning" ideas is nuts. Because they know they would get laughed out of the room if they were to advocate for a hunch. Skating to where the puck is now is not being customer-driven. It's being customer-reactive. And yet we continue to do the same thing and expect different results.

CEO 14

CEO Net Present Value Banking Metrics 14

Harvard Business Review

MAY 4, 2017

As long as there are strong increasing returns to create , it’s possible that the net present value of my profit harvesting is indefinitely larger if deferred to the future. The Refresher: Net Present Value. Today, AWS is a much more valuable business for the company’s long-termism. So is Facebook.

Collison 13

Collison Net Present Value Company Short-term 13

Harvard Business Review

JANUARY 11, 2012

Note what isn't part of the decision: an idea's net present value or return on investment. Teams should certainly develop their best guesses about how the idea will make money, but leaders shouldn't place too much emphasis on financial metrics for early stage ideas.

Company 16

Company Net Present Value How To Proposal 16

Harvard Business Review

MARCH 17, 2016

There are a variety of methods you can use to calculate ROI — net present value , payback, breakeven — and internal rate of return , or IRR. According to Knight, it’s commonly used by financial analysts in conjunction with net present value, or NPV. A Refresher on Net Present Value.

Rate of Return 8

Rate of Return IRR NPV Net Present Value 8

Harvard Business Review

DECEMBER 1, 2011

A firm's long-term value should correspond to the present value of future expected cash flows. This conclusion draws on two arguments, each of which needs to explained briefly. The short-term price of a stock can differ from that implied by the firm's long-term valuation.

Short-term 15

Short-term Hostile Takeover Long-term Management 15

Harvard Business Review

DECEMBER 2, 2010

The higher level of uncertainty associated with H2 and H3 necessitates an updated valuation methodology that takes into account more than the net present value (NPV) of the target. We call this the Opportunity Value (OV) of an asset. This is where Opportunity Engineering comes into play.

NPV 15

NPV Net Present Value Price Engineering 15

Harvard Business Review

MARCH 10, 2011

To make sure they're comparing apples to apples, they discount those future cash flows to arrive at their net present value. When executives evaluate a potential investment, whether it's to build a new plant, enter a new market, or acquire a company, they weigh its cost against the future cash flows they expect will spring from it.

CAPM 15

CAPM Cost Discounted Cash Flow Cost of Capital 15

Harvard Business Review

APRIL 18, 2016

There are a variety of ways to calculate a return on investment (ROI) — net present value , internal rate of return , breakeven — but the simplest is payback period. A Refresher on Net Present Value. For that reason, net present value is often the preferred method. Further Reading.

Payback Period 8

Payback Period Net Present Value ROI Rate of Return 8

Harvard Business Review

FEBRUARY 24, 2011

But why compare apples (book value) to oranges (share price and dividends)? Buffett explains that book value is the best proxy for "intrinsic value," the net present value of all estimated future cash flows. Consider that since 1965, Berkshire's book value grew 434,057% and the S&P index grew only 5,430%.

Letter 15

Letter P&L Insurance Net Present Value 15

Great Leadership By Dan

OCTOBER 21, 2013

Caution: when employees feel like owners, no more wasting money on expensive furniture, management boondoggles, or projects with a poor net present value. You can help them feel like owners too. They will call you on it. You’ll be able to hold your own in management and board meetings. Yes, you too can speak like a CFO!

Finance 246

Finance Course Net Present Value Management 246

Harvard Business Review

FEBRUARY 7, 2011

Anyone who has had to make the argument for an investment knows the basic tool involved: a Net Present Value (NPV) calculation. The overall value of a foreign investment is equal to the NPV of the expected stream of profits for the life of the investment.

NPV 14

NPV Short-term Discount Politics 14

Harvard Business Review

OCTOBER 3, 2011

The research in this area points to three salient points: First, the value of the business is the present value of future cash flows. The skills and effort that catapulted them to the top spot typically do not prepare them to deal with markets and investors. An enlightened CEO learns how the stock market sets prices.

Short-term 14

Short-term Long-term Price CEO 14

Harvard Business Review

MARCH 4, 2013

In some versions of the experiment, a price tag was left on and catalogers were informed of the present's value, to ensure that the employees didn't overestimate it.) Another group was given a gift-wrapped water bottle that was worth around seven Euros. (In

Motivation 12

Motivation Library Short-term Present Value 12

Harvard Business Review

DECEMBER 28, 2016

Customer Lifetime Value : This is the net present value of all future customer revenues with account for attrition and your discount rate. Share of wallet is the ultimate measure of how they spend their money when the ultimate point-of-sale (POS) decision occurs. Study the drivers and barriers of both to optimize here.

Attrition 14

Attrition Metrics Net Present Value KPI 14

Harvard Business Review

AUGUST 15, 2016

Most executives know that the present value of an investment comes from projecting its cash flows and discounting those numbers into today’s dollars. The general rule is projects with positive net present values should get funded, and those with negative ones shouldn’t.

Net Present Value 8

Net Present Value Entrepreneur Christensen Present Value 8

Harvard Business Review

JULY 1, 2016

For instance, he states that “When forced to choose between optimizing the appearance of our GAAP accounting and maximizing the present value of future cash flows, we’ll take the cash flows.” .” He then enumerates the ways in which the firm’s policies will support the objective.

Short-term 13

Short-term Long-term Objective Incentives 13

Harvard Business Review

FEBRUARY 24, 2014

While on the surface, the dirty business of fossil fuels is nothing like Silicon Valley, many in the oil business have moved beyond the standard net present value (NPV) model for assessing the merit of investments. What if I suggested that the best place to look for answers could be the shale oil fields of North Dakota?

NPV 11

NPV Net Present Value Industry Video 11

Harvard Business Review

SEPTEMBER 13, 2017

We found that sustainable and deforestation-free practices created significant financial benefits for all players in the industry’s value chain. Specifically, our analysis found that the net benefits to ranchers ranged from $18 million to $34 million (12% to 23% of revenues) in net present value projected over 10 years.

Supply Chain 8

Supply Chain Net Present Value Retail Cost of Capital 8

Harvard Business Review

OCTOBER 16, 2013

Most companies – including the movie studios in Hollywood – over-rely on basic tools like discounted cash flow and net present value. But it is possible to significantly improve your odds by understanding which decision-support tools work best for which decisions.

Discounted Cash Flow 8

Discounted Cash Flow Net Present Value Comparison Tools 8

Harvard Business Review

MAY 29, 2017

And finally, writing a values statement is used as the start of an ongoing, transformational journey, not the conclusion of one. When these three conditions aren’t present, values can get hijacked and misused. Without accountability, values become a weapon to punish. Here’s how it happens: 1.

Bottom-up 14

Bottom-up Competitive Advantage Organization Company 14

Harvard Business Review

APRIL 27, 2017

The Refresher: Net Present Value. An activist hedge fund, for example, can exert massive pressure to change the strategy and/or investment approach of the company based on its ownership of a sufficient share of the company’s equity. Related Video.

Hedge 12

Hedge Short-term Long-term NPV 12

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. Some of these ideas contradict traditional financial thinking whereas others seem highly controversial or pessimistic.

Report 8

Report GAAP Net Present Value CFO 8

Harvard Business Review

JUNE 28, 2016

But the advantage to the traditional path in the early years is very much offset by the impressive EtA cash flows that occur once the carry starts getting paid and even more so upon exit (which we’ve assumed in year 10 in this example).

Consultative 8

Consultative CAGR EBITDA CEO 8

Harvard Business Review

NOVEMBER 9, 2012

The operational executives, for their part, when confronted by a subject that typically neither they nor their teams completely grasp, all too often come up with little more than a contingency plan and then sit back and hope nothing goes wrong — meanwhile, excessive risk costs continue to reduce the company's present value.

Supply Chain 10

Supply Chain Chief Procurement Officer Risk Management Management 10

Harvard Business Review

NOVEMBER 25, 2013

CFOs are more interested in capital investment estimates, net present values, and a clear outline of the trade-offs of any investment. It’s the CMO’s job to make sure that metrics reflecting the health and value of the customer base –net present value, lifetime value, return on loyalty, cost per acquisition – get on the balance sheet.

CFO 9

CFO Short-term Long-term Benchmarking 9

Harvard Business Review

MAY 1, 2017

In these circumstances, strategies that generate faster growth create more value for most companies than those that improve profit margins. The Refresher: Net Present Value. Related Video. Next time you're deciding about a big investment, NPV can help you make a more informed decision.

ROE 15

ROE Long-term GDP Short-term 15

Harvard Business Review

DECEMBER 11, 2013

These were engineers and network planners; surely, they understood economics and net present value analysis. Still frustrated, I walked the corridors of South Africa Telkom and ran into the old guard. I told them my story. They agreed that the Mandela proposal was nonsense.

Net Present Value 9

Net Present Value Politics Analysis Telecommunications 9

Harvard Business Review

MARCH 6, 2013

There are three main ways of explaining stock prices: The first is basic economics — a share of stock is worth the present value of the future cash flows associated with it. Put another way, a company's stock-market value is a function of how much money investors think it will make in the coming months and years.

Price 8

Price Bond Marketing Present Value 8

Harvard Business Review

OCTOBER 15, 2012

As innovators engage with the market through the MVP, they learn valuable information to help them refine the product-market fit and better understand and further build for the value proposition. Net Present Value ). This iterative approach is consistent with "real options" (vs.

Innovation 9

Innovation Execution Net Present Value Open-book 9

Harvard Business Review

DECEMBER 2, 2013

Managers have embraced this kind of thinking not because they have taken a “be nice” pill, but rather because they see that truly effective community programs reduce community risk, and thereby increase the net present value of their assets in developing and fragile states.

Trends 9

Trends Development Net Present Value NGO 9

Harvard Business Review

MARCH 31, 2017

But having a grasp of terms like EBITDA and net present value are important no matter where you sit on the org chart. The Refresher: Net Present Value. If you’re not a numbers person, finance is daunting. How can you boost your financial acumen? And who’s in the best position to offer advice? Related Video.

Finance 8

Finance Skills EBITDA Net Present Value 8

Harvard Business Review

APRIL 9, 2015

You can use one or more of four ROI calculation methods: payback, net present value , internal rate of return, and profitability index. The finance people determine hurdle rates by looking at the company’s cost of capital, at the risk involved in a given project, and at the opportunity cost of forgoing other investments.

ROI 8

ROI Analysis Rate of Return Net Present Value 8