Comments on: Lessons from my MBA http://www.jananas.com/lessons-from-my-mba/ Fri, 30 Dec 2011 18:04:33 +0000 hourly 1 http://wordpress.org/?v=3.3 By: jana http://www.jananas.com/lessons-from-my-mba/comment-page-1/#comment-115 jana Sun, 02 Aug 2009 12:55:14 +0000 http://www.jananas.com/?p=923#comment-115 You can address the assumption that is incorrect re: IRR. However, NPV still doesn't address the remaining assumptions that go into any business case - how much projects will earn, cost, when things will go live, etc. My experience has always been that when a project doesn't look profitable enough from the get go there's pressure to change these assumptions until it looks better. So even though NPV might be a better measurement from a technical finance standpoint, the actual data that goes into determining future cash flows is likely just as flawed. You can address the assumption that is incorrect re: IRR. However, NPV still doesn’t address the remaining assumptions that go into any business case – how much projects will earn, cost, when things will go live, etc. My experience has always been that when a project doesn’t look profitable enough from the get go there’s pressure to change these assumptions until it looks better.

So even though NPV might be a better measurement from a technical finance standpoint, the actual data that goes into determining future cash flows is likely just as flawed.

]]> By: Riz http://www.jananas.com/lessons-from-my-mba/comment-page-1/#comment-114 Riz Sun, 02 Aug 2009 12:39:29 +0000 http://www.jananas.com/?p=923#comment-114 Common sense usually doesn't translate to the board. :p I think it does make a difference because you *know* an assumption is incorrect when using IRR that can be addressed using NPV. Why not address the incorrect assumption without a whole heck of a lot of work? Common sense usually doesn’t translate to the board. :p

I think it does make a difference because you *know* an assumption is incorrect when using IRR that can be addressed using NPV. Why not address the incorrect assumption without a whole heck of a lot of work?

]]> By: jana http://www.jananas.com/lessons-from-my-mba/comment-page-1/#comment-106 jana Fri, 31 Jul 2009 15:11:25 +0000 http://www.jananas.com/?p=923#comment-106 Riz, I personally don't think that either makes much of a difference. There are so many assumptions that can be manipulated that the final result is rather meaningless. What about good old fashioned common sense to determine if a project makes sense or not? Riz, I personally don’t think that either makes much of a difference. There are so many assumptions that can be manipulated that the final result is rather meaningless.

What about good old fashioned common sense to determine if a project makes sense or not?

]]> By: Riz http://www.jananas.com/lessons-from-my-mba/comment-page-1/#comment-103 Riz Fri, 31 Jul 2009 00:44:24 +0000 http://www.jananas.com/?p=923#comment-103 IRR?! You learned nothing! It's all about NPV. IRR is almost total BS! :) IRR?! You learned nothing! It’s all about NPV. IRR is almost total BS! :)

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