Hi community,
I am doing a refresh of the most important formula to know for the case prep but I have doubts regarding how to calculate the NPV using the Rule of 72.
Any suggestions?
This isn't something that you'll be expected to know if consulting interviews. You need to know your 12 times table, how to calculate percentages, how to multiple and divide numbers - including big numbers. That's it - nothing more complicated than that!
Good luck!
I don't see howcome this is relevant for case interviews. Maybe for finance. In case interviews I doubt you are ever asked to calculate NPV. But if you are, you are not supposed to know any of those heuristic finance tricks.
And specifically about the rule of 72, I don't see it as a useful way to estimate NPV. (although you might be able to use it in a kind of “reverse engineering”).
Rule of 72: take the number 72 and divide it by the interest rate you hope to earn. That number gives you the approximate number of years it will take for your investment to double.
Case interview is not finance interview (do they ask this in finance?). Please trash out any material that is suggesting that you should know this kind of stuff.
Hi there,
NPV and the Rule of 72 are separate concepts!
Rule of 72 is about how long something takes to double in value.
NPV is what are tomorrow's dollars worth today. Normally, NPV will be the expected cashflows divided by the discount rate.
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