Net Present Value (NPV)

So recently, I was with a girl who didn’t know my name before she met me. She just knew the nick, ‘Sid’. But we gelled so well over the phone that at one point in time, we were completing each other’s sentences. There was non-stop banter and laughs, combined with our crazy past dating stories. She is the only girl I have met whose ARR (Annual run rate) in terms of casual encounters for 2019 is more than mine. That is quite ironic because before 2019 her ARR was zero. The next day when we met, the chemistry took a whole new level. Time with her just flew by and I just didn’t want the encounter to end.

Anyway, coming to the MBA concept of ‘Expected Net Present Value (NPV)‘. It is a concept taught in the finance courses at a b-school. It is a capital budgeting technique that adjusts for uncertainty by calculating net present values under different scenarios and probability-weighting them to get the most likely NPV.

Expected NPV is the sum of the product of NPVs under different scenarios and their relevant probabilities. The following formula is used to calculate the expected NPV.

Expected NPV = Σ (p × Scenario NPV)

Scenario NPV is the NPV under a specific scenario while p stands for the probability of occurrence of each scenario.

For example, if a firm is evaluating an investment in the project. There are three scenarios:

NPV (in million dollars)ProbabilityBest400.4Base300.2Worst100.4

Expected NPV

= Best Case NPV × Probability of Best Case Scenario

+ Base Case NPV × Probability of Base Case Scenario

+ Worst Case NPV × Probability of Worst Case Scenario

= 40 × 0.4 + 30 × 0.2 + 10 × 0.4 = 26 million dollars

The expected NPV of the project is 26 million dollars. So the firm can decide accordingly whether it wants to go forward with the investment.

The concept of expected NPV can be used in the context of modern-day dating to draw some interesting insights. When going on any date, you can calculate the NPV of the interaction in terms of expected happiness (dopamine and oxytocin) that can be gained out of it. It would also depend on your present state and primary chemical drivers.

If you are looking for something long-term or have oxytocin as your primary driver, then you need to weigh the expected NPV of the oxytocin gained from that date. Here the LTV also has a vital role to play. As that date might build into exponentially higher oxytocin gains on later dates with the same person.

If you are in a low state or casually dating or have dopamine as your primary dating driver, then you need to weigh the expected NPV of the dopamine gain from that date. That is the summation of the product of expected probabilities of various outcomes and the dopamine gain out of that outcome. An outcome could range from the date standing you up to the two of you having crazy, mind-numbing sex.

That brings me to the girl who was completing my sentences. So, is this it? Have I finally found the second half of my sentence? Well, she is dating a guy seriously for the past few months, they just had a tiff that later got sorted and she is back with him. But, our bodies were like magnets that just didn’t want to let go of one another. That combined with her high drive in bed and an innate desire to please her partner made the dopamine index off the charts. It definitely made the encounter in one of the top five dopamine NPVs in over a decade of my dating life.



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