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

DECEMBER 22, 2010

Consider, for example, that the estimated net present value of obligations under the Social Security system is approximately $8 trillion. The total value of explicit loan guarantees is well over $10 trillion.

GDP 16

GDP Net Present Value Crisis Cost 16

Harvard Business Review

NOVEMBER 7, 2011

But instead of trusting our "educated gut" and making the bet, we used traditional market research to ask customers in those segments what they thought about the idea right now! And using net-present-value estimates for "beginning" ideas is nuts. Skating to where the puck is now is not being customer-driven.

CEO 15

CEO Net Present Value Banking Metrics 15

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 Net Present Value Insurance 15

Harvard Business Review

JANUARY 11, 2012

Can we get to the market without any technological miracles? Note what isn't part of the decision: an idea's net present value or return on investment. Consider some combination of the following criteria: Does what we hope to do fit our strategy? (If If you don't have an innovation strategy , go and create one.).

Company 16

Company Net Present Value How To Proposal 16

Harvard Business Review

DECEMBER 1, 2011

A firm's long-term value should correspond to the present value of future expected cash flows. It apparently takes a courageous and confident board member to second-guess the market! These short-term decisions have the potential to destroy long-term value.

Short-term 15

Short-term Hostile Takeover Long-term Management 15

Harvard Business Review

JUNE 8, 2018

The market caps of just four companies, Apple, Alphabet, Amazon, and Microsoft, now exceed $3 trillion. Their combined assets of $944 billion are an order of magnitude lower than the combined assets of $7,700 billion of the largest 3,177 companies in 1986, when the aggregate market capitalization reached $3 trillion for the first time.

Report 11

Report GAAP Net Present Value CFO 11

Harvard Business Review

NOVEMBER 25, 2013

Marketing is in the midst of an ROI revolution. The arrival of advanced analytics and plentiful data have allowed marketers to demonstrate return on investment with a degree of precision that’s never been possible before. To date, however, the reality of marketing analytics has fallen short of the promise.

CFO 9

CFO Short-term Long-term Benchmarking 9

Harvard Business Review

FEBRUARY 7, 2011

For decades multinational corporations have poured hundreds of billions of dollars of foreign investments into emerging markets , sometimes preferring the investment climate of "stable" authoritarian regimes over "messy" democracies. Certainly the money at stake is substantial.

NPV 15

NPV Short-term Discount Politics 15

Harvard Business Review

NOVEMBER 9, 2012

When Thai flooding created significant shortages in the hard disc drive market, manufacturers lost millions of dollars. These supply chain-related risk costs are present every day that managers come to work. The former refers to costs that are visible and recorded within the company (e.g.,

Supply Chain 13

Supply Chain Chief Procurement Officer Risk Management Management 13

Harvard Business Review

OCTOBER 15, 2012

Applied to open innovation, it means framing conversations so decision-makers understand the future value ("the payoff"), how much investment is needed ("the exercise price"), and the associated risks of bringing an externally sourced technology or concept to market. Net Present Value ). You can invest iteratively.

Innovation 10

Innovation Execution Net Present Value Open-book 10

Harvard Business Review

APRIL 27, 2017

But I long for actions that go beyond admonitions to managers and boards to do better, that give both parties a better chance to stand up to capital markets players, like activist hedge funds, pressuring them to become too short-term focused. The Refresher: Net Present Value. Related Video.

Hedge 12

Hedge Short-term Long-term NPV 12

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 9

Supply Chain Net Present Value Retail Cost of Capital 9

Harvard Business Review

MARCH 6, 2013

stock market performance in 1923, when Standard Statistics Co. It's also one that would be pedantic to harp on, given that, despite its flaws, the Dow is sending pretty much the same message as the S&P and Russell 3000: the stock market is back! So the stock market is doing great. It was replaced as the best measure of U.S.

Price 8

Price Bond Marketing Present Value 8

Harvard Business Review

MARCH 4, 2013

But Akerlof mostly had in mind monetary rewards — you pay me above-market wages, and I'll repay the favor by working harder — which can't quite account for the booming corporate gift business. Another group was given a gift-wrapped water bottle that was worth around seven Euros. (In

Motivation 11

Motivation Library Short-term Present Value 11

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 15

Bottom-up Competitive Advantage Organization Workshop 15

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. Consider the rapid progress Facebook has made on mobile, not only domestically, but in emerging markets.

NPV 10

NPV Net Present Value Industry Video 10

Harvard Business Review

AUGUST 21, 2015

In fact, determining price is one of the toughest things a marketer has to do, in large part because it has such a big impact on the company’s bottom line. “The higher the absolute value of the number, the more sensitive customers are to price changes,” explains Avery. What is price elasticity?

Price 8

Price Debt to Equity Ratio Marketing Net Present Value 8

Harvard Business Review

DECEMBER 2, 2013

Take the example of child sponsorships, highly popular as a marketing tool for many NGOs. This point has gone relatively unheeded in the US and Europe as the economic cycle’s impact on the job market has left people willing to accept any paid work.

Trends 9

Trends Development Net Present Value NGO 9

Harvard Business Review

JUNE 22, 2015

Marketers often have to make the call on whether a certain marketing investment is worth the cost. Can you justify the price tag of the ad you want to buy or the marketing campaign you’re hoping to launch next quarter? What is breakeven quantity (BEQ)? ” The company sells each pair of flip flops for $24.00.

Payback Period 8

Payback Period Fixed Costs Analysis Price 8

Harvard Business Review

AUGUST 3, 2018

On June 25, 2018, Facebook lost market capitalization of more than $100 billion in just two hours of trading after it announced its quarterly performance, despite exceeding analysts’ earnings forecasts. This example illustrates that investors consider information beyond just earnings as value-relevant. What caused this slump?

Report 8

Report GAAP Company Proposal 8

Harvard Business Review

APRIL 2, 2014

You know, the future value of money, the present value of money — money today is worth more than in the future because you can invest it and get interest. You’d have this beta with the market, so you have the riskless rate plus beta times the equity premium. When the Riksbank Prizes in Economic Sciences (a.k.a.

CAPM 9

CAPM Discount Price Finance 9

Harvard Business Review

NOVEMBER 19, 2015

This can be quantified by analyzing the extent to which the share prices of S&P 500 firms are driven by a firm’s present value of future growth options (PVGO) rather than cash flow from current operations. Eventually the company is likely to be out of touch with changing market requirements.

Company 8

Company Succession Maturity Business Model 8

Harvard Business Review

JUNE 18, 2015

We also know that private equity funds have outperformed public equity markets over the last three decades , even after the fees they charge are accounted for. Such investments carry significant equity risk, suggesting that equity-based benchmarks like public market equivalents (PMEs) are appropriate.

CAPM 8

CAPM Discounted Cash Flow Company Rate of Return 8

Harvard Business Review

JUNE 28, 2016

It might be tempting to turn to the highest starting salary paid, which typically goes to the graduate with the most experience in the most competitive market, who often earns crazy money their first year. So, we begin by assuming that the traditional path offers cash compensation equal to the average starting salary. (It

Consultative 8

Consultative CAGR EBITDA CEO 8

Harvard Business Review

SEPTEMBER 27, 2012

Employees frequently attribute breakdowns to incompetence or bad faith on the part of colleagues in other departments: "Those bozos in headquarters [or finance or marketing] screw everything up." Strategies often falter in execution because of insufficient coordination across the organization.

Strategy 9

Strategy Proposal Guidelines Net Present Value 9

Strategy Driven

SEPTEMBER 9, 2011

Many conventional metrics we use to estimate value are based on faulty assumptions. Net present value [NPV] is a case in point. With Discovery-Driven Growth , Rita and Ian offer managers everywhere a time-tested blueprint for planning and executing a strategic growth agenda with confidence – in any market.

Innovation 50

Innovation NPV Business Model Constraint 50