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Risk-adjusted net present value

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rNPV is the abbreviation of risk-adjusted net present value. Net present value (NPV) is the result of a discounted cash flows calculation. rNPV is the result of a discounted cash flows calculation in the presence of success rates. Each cash flow is adjusted (multiplied) with the probability that it occurs. This probability can be deduced from the success rates of the project that is to be valued.

rNPV is the standard valuation method in the drug development industry, where success rates are easily available for all R&D phases.

References

Boris Bogdan and Ralph Villiger, "Valuation in LIfe Sciences. A Practical Guide", 2008, second edition, Springer Verlag.

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