Consulting Q&A – Ask Questions about Your Career

In this overview, you will find all the questions asked so far by the PrepLounge community. Anyone can ask questions and write answers. Our coaches are also happy to share their expertise. If you like an answer, give it an upvote so that it rises to the top. Here you can also find our guidelines and FAQs for the Consulting Q&A.

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Why is discount rate 12%?

Caribbean Island – MBB Final Round

Most recent answer on Apr 28, 2023

#1 Coach for Sessions (4.500+) | 1.500+ 5-Star Reviews | Proven Success (➡ interviewoffers.com) | Ex BCG | 10Y+ Coaching

gave the best answer on Apr 28, 2023

#1 Coach for Sessions (4.500+) | 1.500+ 5-Star Reviews | Proven Success (➡ interviewoffers.com) | Ex BCG | 10Y+ Coaching

Hi Tian, Q: How can we calculate it and did I miss information on that in the case? The discount rate in a DCF model is the rate of return used to discount the future cash flow. It is normally approximated with the Weig ... (read entire answer)

12
Total Upvotes

on Apr 28, 2023 on Apr 28, 2023
Last Activity

Discount Rate and Growth Rate

Caribbean Island – MBB Final Round

Most recent answer on Mar 21, 2023

Anonymous gave the best answer on Mar 20, 2023

You will generally not be required to calculate the discount rate and growth rate, especially for terminal values, but make an educated guess on what it should be. For the discount rate, the higher the risk of the inve ... (read entire answer)

1.2 k
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71
Total Upvotes

on Mar 21, 2023 on Mar 21, 2023
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Perpetuity growth rate and investment cost

Caribbean Island – MBB Final Round

Most recent answer on Sep 24, 2021

Anonymous A asked on Sep 23, 2021

Should we calculate the NVP only to estimate profit on a Y+1 or Y+2 horizon? If yes, should we always take into account the profit growth rate like here? Is the investment cost considered as a fixed cost in the Y+1 pr ... (read entire question)

0
Total Upvotes

on Sep 24, 2021 on Sep 24, 2021
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why 110m * 10%? where is the 10% from?

Caribbean Island – MBB Final Round

Most recent answer on Apr 30, 2021

McKinsey | NASA | top 10 FT MBA professor for consulting interviews | 6+ years of coaching

gave the best answer on Apr 30, 2021

McKinsey | NASA | top 10 FT MBA professor for consulting interviews | 6+ years of coaching

Hi Isabella, thanks for your question. To breakeven we have to put NPV = 0 that is: Total recurring profits / ( Discount rate - Growth rate ) - Total investment = 0 Therefore: Total recurring profits = ( Discount ... (read entire answer)

1.0 k
Views

36
Total Upvotes

on Apr 30, 2021 on Apr 30, 2021
Last Activity

Why is NPV calculated as profit/discount rate

Caribbean Island – MBB Final Round

Most recent answer on Apr 04, 2021

#1 Coach for Sessions (4.500+) | 1.500+ 5-Star Reviews | Proven Success (➡ interviewoffers.com) | Ex BCG | 10Y+ Coaching

gave the best answer on Sep 20, 2021

#1 Coach for Sessions (4.500+) | 1.500+ 5-Star Reviews | Proven Success (➡ interviewoffers.com) | Ex BCG | 10Y+ Coaching

Hi there, The value generated by an asset in perpetuity can be calculated with the perpetuity formula as follows: V=FCF/(r-g) Where V = Value of the asset FCF = Free cash flow r= Discount rate g= Growth rate of FCF Usua ... (read entire answer)

2.8 k
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33
Total Upvotes

on Apr 04, 2021 on Apr 04, 2021
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Shouldn't the Island acquisition cost be disregarded considering that it was already incurred?

Caribbean Island – MBB Final Round

Most recent answer on Feb 22, 2021

#1 BCG coach | MBB | Tier 2 | Digital, Tech, Platinion | 100% personal success rate (8/8) | 95% candidate success rate

gave the best answer on Feb 21, 2021

#1 BCG coach | MBB | Tier 2 | Digital, Tech, Platinion | 100% personal success rate (8/8) | 95% candidate success rate

Hi Vasco, Based on your prior question on another case, you seem to be "obsessed" with sunk cost. I'd advise you to get off this thinking. You're recruiting for a consulting role, not an economics/research assistant ... (read entire answer)

1.5 k
Views

44
Total Upvotes

on Feb 22, 2021 on Feb 22, 2021
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NPV Calculation

Caribbean Island – MBB Final Round

Most recent answer on Feb 16, 2021

#1 BCG coach | MBB | Tier 2 | Digital, Tech, Platinion | 100% personal success rate (8/8) | 95% candidate success rate

gave the best answer on Feb 16, 2021

#1 BCG coach | MBB | Tier 2 | Digital, Tech, Platinion | 100% personal success rate (8/8) | 95% candidate success rate

A few key tips: You should use NPV when: They say we should calculate out into perpituity (i.e. forever) They provide you with a discount rate, cost of equity/capital, etc. There is a set growth rate (into per ... (read entire answer)

1.9 k
Views

30
Total Upvotes

on Feb 16, 2021 on Feb 16, 2021
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