![]() Timing of the expected cash flows – stockholders of Ockham Split have higher preference for cash returns over 4-5 years rather than 10-15 years given the nature of the volatility in the industry. Ockham Split shareholders have preference for diversified projects investment rather than prospective high income from a single capital intensive project.Ģ. Magnitude of both incoming and outgoing cash flows – Projects can be capital intensive, time intensive, or both. Even though cash flow can be calculated based on the nature of the project, for the simplicity of the article we are assuming that all the expected cash flows are realized at the end of the year.ĭiscounted Cash Flow approaches provide a more objective basis for evaluating and selecting investment projects. There are four types of capital budgeting techniques that are widely used in the corporate world –Īpart from the Payback period method which is an additive method, rest of the methods are based on Scenario Planning given risks and management priorities.Ĭapital Budgeting Approaches Methods of Capital Budgeting How to use NPV number for project evaluation, and In this article we will cover - Different methods of capital budgeting In isolation the NPV number doesn't mean much but put in right context then it is one of the best method to evaluate project returns. ![]() The Net Present Value at 6% discount rate is 2658624 What should they include in the agreement, and how should they structure their equity split? Case Authors : Noam Wasserman, Yael Braid Topic : Innovation & Entrepreneurship Related Areas : Collaboration, Conflict, Disruptive innovation, Diversity, Labor, Leading teams, Operations management, Product development, Technology Calculating Net Present Value (NPV) at 6% for Slicing Pie with a Razor: Ockham Technologies' Founding Agreement Case Study Years But as Ockham entered its initial phase of product development, pressure began mounting for the team to discuss and finalize a founding agreement. The trio had provided the seed capital of $150,000, contracted a development team to build their product, garnered serious interest from a potential investor, and readily agreed on their roles within the company (Jim was CEO, Ken was COO, and Mike was Head of Product Management). Each founder had contributed significantly to bringing the Ockham concept to life. Soon they recruited a third member, Mike Meisenheimer, to lead product development. Uncertainty lingers over each member's future contributions, though - how is the team to devise a durable and effective split? Jim Triandiflou and Ken Burows worked resolutely to plan for the launch of their sales management software company. Ockham Technologies' three founders are about to craft their founding agreement and split the equity among themselves. If a project’s NPV is greater than or equal to zero, the project should be accepted.Ĭase Description of Slicing Pie with a Razor: Ockham Technologies' Founding Agreement Case Study The net present value (NPV) of an investment proposal is the present value of the proposal’s net cash flows less the proposal’s initial cash outflow. It also touches upon business topics such as - Value proposition, Collaboration, Conflict, Disruptive innovation, Diversity, Labor, Leading teams, Operations management, Product development, Technology. The Slicing Pie with a Razor: Ockham Technologies' Founding Agreement (referred as “Ockham Split” from here on) case study provides evaluation & decision scenario in field of Innovation & Entrepreneurship. Slicing Pie with a Razor: Ockham Technologies' Founding Agreement case study is a Harvard Business School (HBR) case study written by Noam Wasserman, Yael Braid. NPV solution for Slicing Pie with a Razor: Ockham Technologies' Founding Agreement case studyĪt Oak Spring University, we provide corporate level professional Net Present Value (NPV) case study solution. ![]() Introduction to Net Present Value (NPV) - What is Net Present Value (NPV) ? How it impacts financial decisions regarding project management?
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