Innovation-Gate-Process - Hochschule Ludwigshafen am Rhein

Vorlesung: Produkt- und Innovationsmanagement
Teil II: Innovationsmanagement – Der Innovation-Gate-Prozess
Net Present Value (NPV)
Auszug aus: http://www.prioritysystem.com/glossary2.html#npv
“After tax project cash flows occurring in future years are adjusted using an annual discount rate
meant to represent the affect of time and risk on the project's value. Oftentimes, the discount rate
is selected to be the organization's cost of capital, but it is more accurate to adjust the discount
rate either upward or downward (e.g., as a "hurdle rate") according to the risk of the project.
NPV has several limitations. One is the difficulty of identifying all of the impacts a project would
have on organizational cash flows for future years. Also, by requiring that a single, nominal cash
flow be identified for the project, NPV ignores uncertainty. Another problem is that it is not clear
how the discount rate should be chosen. According to finance theory, the correct rate is the return
available from investing in securities equivalent to the risk of the project being evaluated.
Research on real options shows that the discount rate ought to be adjusted over time depending
on how uncertainties are resolved and on the project management strategy. Using a constant
discount rate for a project implicitly assumes that uncertainty increases over time in a specific way
(geometrically). Ranking projects by NPV creates a bias toward short-term, quick payoff projects
because it severely penalizes project benefits that occur in the more distant future. “
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Prof. Dr. Manfred König