| Topic Name: |
vc valuation |
| Message Name: |
genius, |
| Date Posted: |
04/02/2002 |
| In Reply To: |
How did YOU get hired??
1) NPV = SUM over i's(cash return at end of year i / [(1 + rate)^ i])
The discount factor is not (1 + rate^i)
2) Your formulation for IRR doesn't yield any solutions except for % = 0.
To get IRR for a one-time cash return on investment you solve:
{exit multiple of money / [(1+ IRR)^i]} = initial investment principal
You don't need to go to a bb to learn first order valuation metrics. IRR and NPV are covered in the first 2 chapters of any corporate finance text.
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| Message: |
that's what i meant by E, i meant sigma, or sum of cash flows. plus, i said that this was a simplified model...the formula does yield a result; the irr is the rate at which npv = 0, taking into account all cash inflows and outflows. your formula basically restated mine, although in a different form.
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