1. Start with machine assumptions
Use the Investment Assumptions section at the top to define the project.
The dashboard will then prefill the detailed cash flow table for you.[web:189][web:270][web:274]
- Total Investment (£) = Machine Investment + Testing Material + Shipping + Installation/Start-Up. This pre-fills the Initial investment at time 0 (you can still override).
- Depreciation is calculated straight-line as (Total Investment − Salvage Value) / Depreciation years, and applied equally across years until the depreciation period ends.[web:238]
- The Machine Salvage Value is added as a terminal cash inflow in the last modelled year and taxed using the same tax rate as PBT (after-tax salvage in the final cash flow).[web:231][web:239][web:241][web:243]
2. Per-part economics
In the Revenue and Cost Assumptions block, define the unit economics for the part you are producing.[web:219][web:222][web:224]
- Total Cost per Part = Material Cost per Part + Labour Cost per Part.
- Gross Profit Margin % per Part = (Sale Price per Part − Total Cost per Part) ÷ Sale Price per Part.
- Annual Maintenance & Support and Closeout Support Costs feed into the per-period operating expenses (maintenance) and final-year closeout costs (manually entered in the detailed rows if you want them time-specific).
3. Capacity, growth and auto-population
Capacity and growth assumptions are used to pre-populate the per-period table, but every field remains editable.[web:189][web:270]
- Annual Machine Capacity is used as the default Units sold in each year; you can override units in the per-period rows.
- Price growth Years 1–3 and Years 3–5 are annual growth rates applied to the sale price. The model compounds these percentages to project future unit prices.
- Material, Labour, and Support & Maintenance growth are annual growth rates applied to per-part costs and annual maintenance. These drive COGS and maintenance per year until you override them in the detailed table.
- Tax rate on PBT (%) is global. Profit before tax is computed per year and tax is automatically calculated as PBT × tax rate (no tax on losses).[web:189]
- WACC / Hurdle Rate (%) is the discount rate used to calculate NPV for the project.[web:94][web:98][web:161]
4. Working capital metrics
Working capital is calculated from DSO, Inventory Days and DPO using each year’s revenue and COGS, then fed into the cash flow as Working capital investment.[web:200][web:215][web:216][web:220][web:203][web:230][web:237][web:242][web:261][web:263]
- A/R (Accounts Receivable) = Revenue × DSO ÷ 365.
- Inventory = COGS × Inventory Days ÷ 365.
- A/P (Accounts Payable) = COGS × DPO ÷ 365.
- Total Working Capital = A/R + Inventory − A/P.
- Net Working Capital Investment each year = change in Total Working Capital (Year 1 uses the full WC as the initial build-up). This value populates the “Working capital inv. (£)” field per period.
- WCIR % (working capital intensity) is Total Working Capital ÷ Revenue, giving you a sense of how much cash is tied up in operations relative to sales.
5. Per-period cash flow logic
Each year’s product cash flow is built as a mini income statement plus working capital and non-cash items.[web:189][web:270][web:274]
- Revenue = Units sold × Unit price.
- COGS = Units sold × (Material cost per unit + Labour cost per unit).
- Gross profit = Revenue − COGS; Gross margin % = Gross profit ÷ Revenue.
- Total operating expenses = Operating expense + Maintenance + Depreciation.
- Profit before tax (PBT) = Gross profit − Total operating expenses + Other income/(expense).
- Tax = PBT × tax rate (if PBT is positive; zero otherwise).
- Net income = PBT − Tax.
- Product cash flow = Net income + Depreciation/Amortisation (add-back) − Working capital investment.
- In the final year, after-tax salvage and any closeout support costs should be reflected by adjusting Other income/(expense) and/or Product cash flow for that year.
6. Investment appraisal metrics
The dashboard calculates standard capital budgeting metrics from the initial investment and the series of product cash flows.[web:94][web:98][web:161][web:189][web:270][web:264]
- NPV (Net Present Value) discounts all product cash flows at the WACC/hurdle rate and subtracts the initial investment. Positive NPV indicates value creation.
- IRR (Internal Rate of Return) is the discount rate that makes NPV = 0, given at least one positive and one negative cash flow.
- PI (Profitability Index) = Present value of inflows ÷ Initial investment. Values above 1.0 indicate acceptable projects.
- ROI ≈ (Sum of undiscounted cash inflows − Initial investment) ÷ Initial investment, expressed as a %.
- Payback period uses cumulative cash flow to estimate when the investment is recovered (with interpolation between years).
7. Sensitivities and Monte Carlo
The dashboard includes a discount-rate NPV profile and a Monte Carlo simulation to explore uncertainty.[web:94][web:189][web:270][web:253][web:256][web:260][web:132]
- NPV profile chart: Shows how NPV changes as you vary the discount rate across a range (e.g., from −50% to 40%).
- Monte Carlo NPV risk: Runs many simulations with ±20% random shocks to each year’s product cash flow and reports the distribution of NPV (mean, confidence intervals and probability NPV > 0).
- Use these tools to see how robust the investment is to changes in assumptions, not as a guarantee of outcomes.
8. Typical workflow
- Enter machine investment, setup costs, depreciation years and salvage value.
- Define per-part material, labour and price; review the gross margin per part.
- Set capacity, tax rate, WACC and growth assumptions, then click “Apply assumptions to dashboard”.
- Review and tweak any per-period row (units, prices, opex, working capital) if needed.
- Click “Run analysis” to see NPV, IRR, PI, ROI and payback, and review the charts.
- Optionally run Monte Carlo to see NPV risk, and export results to CSV / print to PDF.