S u m o f c a s h f lo w s s in c e in it ia t io n ( $ 1 ,0 0 0 )

Cash flow diagram

$400,000
Discounted
Non-
discounted
$300,000 Plant startup

$200,000

$100,000 Net Present Value

(Discounted)

$0

Discounted payback period

-$100,000

-$200,000
0 2 4 6 8 10 12
Years since project initiation
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1 Simulation of NPV calculation (W.R. Wilcox, Clarkson U, Oct 2004)
2 Revised June 2007
3 All numbers in $1000 (so, for example, $1,500 is $1.5 million)
4 CTCI = $139,500 (i.e., $139.5 million total capital investment, not discounted)
5 Total Total Disc land
6 n Cland CTDC Cstartup CWC SR COMd GE D IT CF DCF DCF CF + WC
7 0 $2,500 -$2,500 -$2,500 -$2,500 -$2,500
8 1 $30,000 -$30,000 -$27,273 -$29,773 -$32,500
9 2 $40,000 $60,000 -$100,000 -$82,645 -$112,417 -$132,500
10 3 $7,000 $200,000 $120,000 $23,100 $14,000 $10,770 $39,130 $29,399 -$83,018 -$93,370 $46,957
11 4 $200,000 $120,000 $23,100 $22,400 $10,350 $46,550 $31,794 -$51,224 -$46,820 $42,688
12 5 $200,000 $120,000 $23,100 $13,440 $13,038 $43,862 $27,235 -$23,989 -$2,958 $38,808
13 6 $200,000 $120,000 $23,100 $8,064 $14,651 $42,249 $23,849 -$141 $39,291 $35,280
14 7 $200,000 $120,000 $23,100 $8,064 $14,651 $42,249 $21,681 $21,540 $81,540 $32,072
15 8 $200,000 $120,000 $23,100 $4,032 $15,860 $41,040 $19,145 $40,685 $122,580 $29,157
16 9 $200,000 $120,000 $23,100 $17,070 $39,830 $16,892 $57,577 $162,410 $26,506
17 10 $200,000 $120,000 $23,100 $17,070 $39,830 $15,356 $72,933 $202,240 $24,096
18 11 $200,000 $120,000 $23,100 $17,070 $39,830 $13,960 $86,893 $242,070 $21,906
19 12 -$2,500 -$60,000 $200,000 $120,000 $23,100 $17,070 $102,330 $32,605 $119,499 $344,400 $19,914
20 NPV = $119,499
21
22 CTCI = Total capital investment, TCI = Cland + CTDC + Cstartup + CWC, asssuming no royalties must be paid for process.
23 n = year since beginning of construction
24 Cland = cost of land
25 CTDC = total depreciable capital = 1.18(CTBM+Csite+Cbuildings+Coffsite facilities) (FCIL)
26 CTBM = Total bare module cost = installed cost of all equipment, etc. = Inside Battery Limits Investment (ISBL)
27 Cstartup = startup cost
28 CWC = working capital
29 SR = sales revenues (from sale of product)
30 COMd = Cost of manufacturing (without depreciation).
31 GE = General expenses
32 D = Depreciation (5-year MACRS used here)
33 IT = Federal and state income tax = r*(SR - Cstartup - COMd - GE - D) for that year.
34 r = Total income tax rate (30% used here)
35 CF = Cash flow for that year = SR - Cland - CTDC - Cstartup - CWC - COMd - GE - IT
36 DCF = Discounted cash flow for that year = CF/(1+i)n
37 i = Required rate of return. here i = 0.1
38 NPV = Net present value = the sum of DCF for all years.
39 DCFRR = Discounted tax flow rate of return is the value of i at which NPV = 0. (Also known as the Internal Rate of Return, IRR)
40 Use Goal Seek to set cell H37 so that cell L20 is 0. (Alternately, copy the CF column and paste special values, then use the IRR function)
41 This gives 28.077%
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42 Discounted payback period when total DCF = - (Disc land + WC)
43 About 4.5 years here.