HSBC Interview Question

How would you factor bad credits in a discounted cah flow analysis.

Interview Answers

Anonymous

Aug 31, 2016

Increase the interest rate as this will decrease the npv due to the perceived risk. You may also increase the project life cycle all in the hope of incorporating risk.

Anonymous

Aug 31, 2016

Increase the interest rate or project discount factor as this will decrease the npv due to the perceived risk. You may also increase the project life cycle all in the hope of incorporating risk.