# VC NPV

not seeing too much derivatives and alternative asset questions. Name the steps needed to calculate NPV for a VC project. 120 seconds or less. Whoever answers it first gets my top stock pick idea right now

Seed stage early stage formative stage later stage … get that mezz financing

Formative stage - seed stage - early stage Expansion stage - second stage - third stage Mezzanine

mcf Wrote: ------------------------------------------------------- > Seed stage > early stage > formative stage > later stage > … get that mezz financing I probably phrased the question wrong. answer is 1) calculate prob of failure 2) find NPV for up and down state 3) do a prob weighted NPV

Which, interestingly enough, i’ve never seen a question on in the context of venture capital… but I have seen in in the quant section. It was in the context of more of a binomial distribution problem.

initial cost + prob of success*cash flow if success/(1+discount rate)^n = NPV

b/ I fuct up, the stock pick goes to everyone it is DGLY microcap, stock up 50% since I ramped up on name, they are likely to double sales in 2008 and I got an EBITDA margin adjusted price target of \$10 when I looked @ it @ 7 bucks. they have a new product for the law enforcement industry – a digital camera device that feeds off WiMAX. one to buy on pullbacks under \$10. Only one sell sider covers the stock so name is not on radar screens of buy side except some hedge funds. disclosure: no position.

heha168 Wrote: ------------------------------------------------------- > initial cost + prob of success*cash flow if > success/(1+discount rate)^n = NPV YES

mcf Wrote: ------------------------------------------------------- > Which, interestingly enough, i’ve never seen a > question on in the context of venture capital… > but I have seen in in the quant section. It was > in the context of more of a binomial distribution > problem. BOOK 6, CFAI

They give to you the probability of success, you need to calculate the probability of failue (1-Psuccess) then NPV and weight it thats it

strangedays Wrote: ------------------------------------------------------- > They give to you the probability of success, you > need to calculate the probability of failue > (1-Psuccess) > > then NPV > > and weight it > > thats it All the problems I encountered the question give the prob. of failure and you have to calculate the prob of success (1 - P(F))*(1- P(F))…

I found one but was the way around

strangedays Wrote: ------------------------------------------------------- > I found one but was the way around me too, tricky!!!