In addition to the NPV Calculation presented above, cash flow
considerations can use the BCG Product Portfolio matrix, which can map
out the cash flow outcomes of a proposed product in the context of existing
products which are cash cows or shining stars, or even dogs (this evaluation
can help dogs being pruned from a product line / product mix).
To be successful, a firm should have a product mix consisting of product
lines with varying market shares and growth rates. Since the new proposed
product can be a question mark to start with, the initial cash flow C
0
for the
project can come from the Cash Cow Product Mix. If the product
