Question

Mike Karanikolas wants to enter the French market with his usual strategy of using influencers. Two influencers are considered to be hired. The first one is a young growing personality and asks for a consideration

asked Apr 5, 2020 151k views

Mike Karanikolas wants to enter the French market with his usual strategy of using influencers. Two influencers are considered to be hired.

The first one is a young growing personality and asks for a consideration of 100 000€ to be paid at the start of the contract, and Mike determines that over 4 years, this particular influencer would yield successively each year: 20 000€, 30 000€, 40 000€, 50 000€. Those amounts would be actualised at a 10% rate to take risk into account.
Is it a good investment? Answer to this question based on two selection criteria: Net Present Value and Internal Rate of Return.

The second influencer is more stable and is asking for the same 100 000€ consideration, but revenues would be more stable at 35 000€ every year at the end of the next 4 years.
Is the second influencer a better choice than the first influencer? Answer to this question based on the NPV criterion.