So What Club

Reading a business through its numbers: the three statements, cash and value

Two projects, two different winners

The prompt

A fictional manufacturer in Poland can do only one of two projects (EUR millions). Project A costs 100 today and returns 60 in year 1 and 72 in year 2. Project B costs 1,000 today and returns 1,150 in year 1. Its cost of capital is 10 percent. Which should it choose?

Before you reveal anything, plan your own structure and first move on paper. Then reveal one part at a time and compare.

Clarifying questions, with the interviewer's answers

Next case

Read the next worked case the same way: plan your own answer first, then reveal one part at a time.

Next case: Pulling the five numbers that matterThe lesson: Valuation in practice: multiples, a simple DCF, NPV, IRR and payback
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