CFA Method of VC Payoff ask, why, different, actually, because

mnieman

In the text (CFIA book 6) there are TWO ways to calculate the NPV of a VC project. For both instances, the questions (Question 10 and 28 in the AI reading) ask for the same answer…”calulate the NPV of the project”
why the F does CFAI give us two ways for solving the NPV! I thought that was a real sh*tty thing for the text to do.
I actually might write CFAI about this because the two different methods, while both “correct” according to the text, give TWO DIFFERENT NPVs!

Andreas42

No they do not.

wilslm

(1  Year 1 Percentage of Failure) * (1  Year 2 Percentage of Failure) * (1  Year x Percentage of Failure)/RRoR^x years  Initial Cost of Project.
Both methods come out the same.