Harvard Business Review

MARCH 10, 2011

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. To make sure they're comparing apples to apples, they discount those future cash flows to arrive at their net present value.

CAPM 15

CAPM Cost Discounted Cash Flow Cost of Capital 15

Harvard Business Review

OCTOBER 3, 2011

A CEO's job is about resource allocation with a goal of earning a return in excess of the opportunity cost of capital. The challenge is figuring out how to allocate human and financial capital to its best and highest use for the long term. This requires difficult trade-offs.

Short-term 14

Short-term Long-term Price CEO 14

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

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. Marketing KPIs that don’t directly address shareholder value and the company’s objectives don’t tell the CMO or the CFO where marketing efforts are having the most impact.

CFO 9

CFO Short-term Long-term Benchmarking 9

Harvard Business Review

APRIL 9, 2015

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. Evaluate the investment. This is the final step.

ROI 8

ROI Analysis Rate of Return Net Present Value 8

Harvard Business Review

JUNE 18, 2015

For instance, despite the prominent role that discounted cash flow valuation methods play in academic finance courses, few PE investors use discounted cash flow or net present value techniques to evaluate investments. Rather, they rely on internal rates of return and multiples of invested capital.

CAPM 8

CAPM Discounted Cash Flow Company Rate of Return 8

Harvard Business Review

AUGUST 21, 2015

Once you do that, you can adjust price up or down to better represent the level of value you are providing to your customers. Read refreshers on net present value , breakeven quantity , debt-to-equity ratio , and cost of capital.

Price 8

Price Debt to Equity Ratio Marketing Net Present Value 8