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EastCoastJ

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tT
发表于 2011-7-13 16:03 | 只看该作者

NPV calculation for venture capital

capital
Does any one know when to consider successful and unsuccessful probabilities in calculating NPV for closely held companies? I have seen both types of questions, one in which probabilities were considered but in the other probabilities were not considered.
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burnsy562000

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发表于 2011-7-13 16:03 | 只看该作者
I think you only use probabilities for venture capital investments?

I would assume, if you were given probabilities in the question, that you were meant to use them...

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Londonrocks

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3#
发表于 2011-7-13 16:03 | 只看该作者
Kiakaha Wrote:
-------------------------------------------------------
> I think you only use probabilities for venture
> capital investments?
>
> I would assume, if you were given probabilities in
> the question, that you were meant to use them...


yes of course you use probabilities only for venture capital investments. But, I have seen questions where they don't use probability to calculate NPV, even though they are given in the question.

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JGovender

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4#
发表于 2011-7-13 16:03 | 只看该作者
that seems pretty illogical to me -- ie if you're aware there's a substantial chance your investment will end up with a nil return, and you don't include that in your calculation, then your NPV is totally inaccurate

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kamara5

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5#
发表于 2011-7-13 16:03 | 只看该作者
Kiakaha Wrote:
-------------------------------------------------------
> that seems pretty illogical to me -- ie if you're
> aware there's a substantial chance your investment
> will end up with a nil return, and you don't
> include that in your calculation, then your NPV is
> totally inaccurate

Well the question I am talking about is from Schweser mock and it's not really true that they have not considered probabilities rather return was given in the question with probabilities already considered(which was hard to understand from the language of the question), and explanation was, return given should be discounted and initially outlay should be subtracted from the discounted value to compute NPV.

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