Background:
The BDC worked with the sales
and business teams to determine
five different potential
scenarios for sales and cost.
The team also projected the
probability of success for each
scenario (the total of the
probabilities equaled 100%). For
each scenario, we collected
projected sales for 10 years of
sales post launch. We also
collected the cost to bring the
product to market, the launch
and ongoing sales and marketing
cost, and the overhead required
to launch and support the
product. These projections
allowed us to calculate
projected cash flow for a
ten-year period for each
scenario. The cash flows from
each scenario were multiplied by
the probability of success to
calculate a weighted cash flow.
This allowed us to apply a risk
factor within the cash flow
projection model.
The discount rate used was the
internal hurdle rate for this
client. The present value of
this discounted cash flow
analysis was equal to $600
million and as a result of the
valuation the client pursued and
launched the product.
Output:
Financial model and presentation
packet
