Net present value calculation for both perpetuity and for fix period

Hey there,

If you don't have an MBA, the likelihood of having to use the formula in an interview (at least for MBB) is close to zero. If you did, you'd probably just to have to discount a couple cash flows in the future (i.e. a manual DCF) rather than just calculating the NPV using the NPV formula. If you are applying to different firms, you should check, but again I would be surprised.

Anyways, to answer your question -  for a fix period you would just discount each cash flow year by year, see below:

In perpetuity, you just divide the cash flow by the (discount rate - the growth in the cash flow):

Note that if there is no growth in cash flow, then g=0, and the formula is D/r.

Hi,

Check this presentation:

https://web.iit.edu/sites/web/files/departments/academic-affairs/academic-resource-center/pdfs/NPV_calculation.pdf

I believe you need to understand the concept rather than just apply the formulas. So google can help you here.

Best

Hello!

Precisely for the high amount of questions (1) asked by my coachees and students and (2) present in this Q&A, I created the “Economic and Financial concepts for MBB interviews”, recently published in PrepLounge’s shop (https://www.preplounge.com/en/shop/prep-guide/economic_and_financial_concepts_for_mbb_interviews).

After +5 years of candidate coaching and university teaching, and after having seen hundreds of cases, I realized that the economic-related knowledge needed to master case interviews is not much, and not complex. However, you need to know where to focus! Hence, I created the guide that I wish I could have had, summarizing the most important economic and financial concepts needed to solve consulting cases, combining key concepts theorical reviews and a hands-on methodology with examples and ad-hoc practice cases.

It focuses on 4 core topics, divided in chapters (each of them ranked in scale of importance, to help you maximize your time in short preparations):

• Economic concepts: Profitability equation, Break even, Valuation methods (economic, market and asset), Payback period, NPV and IRR, + 3 practice cases to put it all together in a practical way. 
• Financial concepts: Balance sheet, Income statement/P&L and Performance ratios (based on sales and based on investment), +1 practice case
• Market structure & pricing: Market types, Perfect competition markets (demand and supply), Willingness to pay, Pricing approaches, Market segmentation and Price elasticity of demand, +1 practice case
• Marketing and Customer Acquisition: Sales funnel, Key marketing metrics (CAC and CLV) and Churn, +1 practice case

Feel free to PM me for disccount codes for the guide, and I hope it helps you rock your interviews!