Practical sheet | REF: FIC1744 V1

Understanding the differences between exploration and exploitation

Author: Marc EVANGELISTA

Publication date: November 10, 2021 | Lire en français

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2. Focus on market size rather than Net Present Value

In operating mode, and more specifically when setting up projects, one of the key indicators is "NPV" or "Net Present Value". Net present value is a measure of the profitability of an investment, calculated on the basis of the discounted cash flows generated by the operation. Projects must therefore be evaluated on the basis of their estimated future value.

In exploration mode, this calculation is virtually impossible to perform. And even if some people try, the result doesn't really mean anything. Are you going to rely on optimistic assumptions, or are you going to propose a more reasonable approach? Given that there's often a huge gap between the two situations.

2.1 Size of territory to conquer

What's important in exploration is...

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Focus on market size rather than Net Present Value