What a defensible payback shows: simple payback, NPV, and IRR

What is simple payback here?

Simple payback years equal net installed cost divided by annual savings when both are positive. Net installed cost is equipment plus install plus freight plus other one-time cost, minus rebate and salvage, and not below zero. Blank install is 12% of equipment and blank freight is 3% once equipment cost is entered and percent assumptions are on.

Annual savings add labor, yield, waste, energy, maintenance, downtime, water, and consumables, plus capacity and quality only when entered.

What do NPV, discounted payback, and IRR add?

NPV discounts each year's cash flow at the discount rate over the useful life. The defaults are 10% and 10 years. Escalation defaults to 0. Discounted payback is the year cumulative present value covers the net installed cost. IRR is the discount rate that sets NPV to zero. The discount rate is not a loan model.

Simple payback ignores the timing of later years. NPV and IRR do not. Use the one the meeting asked for, and say which one it is.

What does the stress test change?

Throughput minus 20% scales yield, waste, energy, water, and consumables. Energy plus 30% scales the electricity and gas prices. The combined case applies both. Labor, maintenance, and downtime stay fixed when throughput changes. A separate tornado moves listed drivers by 20% and ranks them by the swing in NPV.

Run it on the worksheet

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