I am wondering when we calculate NPV should we use
1.NPV=EBIDTA/Discount Rate
or
2.NPV=Net Income/Discount Rate
Thank you in advance
Hi,
At the real projects it's EBITDA. However, the case is a very simplistic representation of the real-life situation, so in most of the cases you will just use the Net Profit
Best
(edited)
Hello,
Typically you won't be given enough information to calculate EBITDA, just Net Income, so that's what I would use. Obviously, if you have all the information, don't ignore it!
In order to be thorough, you can also check with the interviewer whether you there is additional data to calculate a more accurate NPV. 99% of the time there won't be.
Does this help?
Allen
Hi there,
You should use what's provided!
In most cases you will be given profits or cashflows which you can use. It wouldn't be much more complicated than that.
In general, you need to go the furthest possible. So, if they provide you with figures that would allow you to calculate EBITDA, then you should!
Also, don't forget that growth rate needs to be considered! If a growth rate exists, you need to subtract it from the discount rate.
Hi, in addition to the answers of other coaches I recommend reading this useful article: https://www.preplounge.com/en/bootcamp.php/business-concept-library/common-terms-of-business/net-present-value-npv
Hope it helps,
Antonello
Hi there,
In theory it is neither of the two. You should use free cash flow as a reference:
V=FCF/r
However, in basically all the cases you can approximate it with net income (or EBITDA if present). Just be sure to clarify with the interviewer if it is ok to use it instead of FCF.
Best,
Francesco
Our client is SmartBridge, a nonprofit educational institution offering face-to-face tutoring services. The client operates in the US. The mission of SmartBridge is to help as many students as possible to complete studies and prevent that they drop from the school system, in particular in disadvant ... Open whole case
Espresso Whatelse is an Italian company that produces coffee and espresso machines since 1908. It is the Italian market leader and has a strong presence overall in Europe. In 2019, Espresso Whatelse has increased its revenues but it has seen declining profit margin. Your client wants to understand ... Open whole case
Problem definition: Our client is Korean Car Parts (KCP), a multi-national original equipment manufacturer (OEM) of car parts based in Korea. They've recently seen a decline in profits and have brought us in to understand how to address this falling profitability. Open whole case
The COVID-19 pandemic has killed millions of people worldwide and led to devastating economic impact. A vaccine is one of the biggest hopes for stopping the pandemic. The World Health Organization (WHO) is working with multiple stakeholders to ensure groups at higher risk of becoming infected and ... Open whole case
Sky China, a government-backed Chinese airline, has recently seen profits plummet due to COVID-19. Profits are down 80% in the months of February and March, but are showing early signs of a rebound in April. They've brought you in to first investigate what can be done immediatedly to prevent hemor ... Open whole case
5 sessions package with Vlad 
Integrated FIT Guide for MBB by Clara 
