Hello,

This spreadsheet is an analysis tool to help estimate the potential for profitability of your project. It is based
on a Net Present Value analysis. In an ideal analysis, an NPV of zero or below means the project will not meet
the rate of return required by the company and should not be pursued. An NPV greater than zero means the
project is attractive and should be continued. However, realize that this is based on the accuracy of the inputs
and estimates, so the analysis should be used in this context.
This spreadsheet is based on a cash flow analysis. To keep it simple, it does not include inflation or
depreciation effects. If you're designing a new product, you will need to use the "New Product" worksheet. If
you are doing a cost reduction on an already existing product, use the "Cost Savings Project" worksheet.
A few quick items on these worksheets. Input cells are in red (of course, we do realize that in accounting, red
has the connotation of a negative cash flow -- i.e., bleeding money -- but it also happens to stand out the most
on the spreadsheet). You can turn protection off if you need to modify the sheet. The small red "arrows" in
the cells are comments on that cell. Pass your cursor over them to see the comments.
We hope it helps you with the project, as well as teaching you something about the basic analysis techniques
used in industry. Please give us feedback and let us know of any errors or potential improvements.
Regards,
Mark Martin
Version 1.02
Modified: 1/23/04

Created: 5/7/2000
Version 1.01 (9/16/03 - minor updates)
Version 1.02 (1/23/04 - corrected gross margin calculation)

It is based
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is techniques

ME217 DFM Cash Flow Analysis

DFM PROFITABILITY ANALYSIS (New Product)

Company: Team DFM
Members:
Analysis Date:
Sales
End-User Price $ 100 Gross Margin
Price
Reseller 2 (if any)
0%
$
Reseller 1 (if any)
0%
$
Company Target
50%
$
100
Company Target Cost $ 50 (or less)
Note: For all input numbers, show a separate sheet describing how you determined these numbers.
Calendar Year
2009
2010
2011
2012
2013
2014
2015
TOTAL
---------------------------------------------------------Expected Volumes
5,000
10,000
30,000
50,000
15,000
5,000
115,000
Company Actual Sales Price
$
45 $
45 $
45 $
45 $
45 $
45 $
FIXED COSTS
(describe costs on separate page)
----------------------------------------------- Product Design
- Machines & Equipment
- Mfg Start-up
- Tools/Molds (inj. molding, casting, etc.)
- Misc 1
- Misc 2
- Misc 3
PRODUCT'S FIXED COSTS
VARIABLE COSTS / unit
(describe costs on separate page)
----------------------------------------------- Material
- Labor
- Overhead %
Material OH
Labor OH
Total Overhead Cost
- Misc

$
$
$
$
$
$
$

0
------125,000
75,000
20,000
100,000
80,000
-

$
$
$
$
$
$
$

1
------20,000
20,000
10,000
-

$
$
$
$
$
$
$

2
------5,000
5,000
-

$
$
$
$
$
$
$

3
------5,000
5,000
-

$
$
$
$
$
$
$

4
------5,000
5,000
-

$
$
$
$
$
$
$

5
------5,000
5,000
-

$
$
$
$
$
$
$

6
-------

TOTAL
---------$ 165,000
$ 95,000
$ 20,000
$ 130,000
$ 80,000
$
$
-

400,000

50,000

10,000

10,000

10,000

10,000

$ 490,000

$
$

0
------28.00
4.17

$
$

1
------28.00
4.00

$
$

2
------28.00
4.00

$
$

3
------28.00
4.00

$
$

4
------28.00
4.00

$
$

5
------28.00
4.00

$
$

6
-------

$
$

4.83
-

$
$

4.80
-

$
$

4.80
-

$
$

4.80
-

$
$

4.80
-

$
$

4.80
-

$
$

37.00

36.80

36.80

36.80

36.80

36.80

15%
15%

PRODUCT'S VARIABLE COSTS / unit

ANALYSIS
----------------------------------Unit Contribution Margin (Price - Variable Cost)
Gross Profit Margin

2009
2010
2011
2012
2013
2014
2015
------------------------------------------------8.00 $
8.20 $
8.20 $
8.20 $
8.20 $
8.20 $
22%
22%
22%
22%
22%
22%
#DIV/0!

Revenues (Price * Volume)

Total Variable Costs (Volume * Var Cost/unit)
Gross Profit (Rev - Tot Var Costs)
Fixed Costs
Pretax Income (Loss)=Gross Profit-Fixed

$
$
$
$
$

225,000
184,978
40,023
400,000
(359,978)

$ 450,000
$ 368,000
$ 82,000
$ 50,000
$ 32,000

NET PRESENT VALUE ANALYSIS (PROFITABILITY CALCULATION)

-------------------------------------------------------(assumes accurate Volume & Cost
Rate of Return Required
forecasts)
10%
15%
20%

$1,350,000
$1,104,000
$ 246,000
$ 10,000
$ 236,000

$2,250,000
$1,840,000
$ 410,000
$ 10,000
$ 400,000

$
$
$
$
$

675,000
552,000
123,000
10,000
113,000

Net Present Value

$ 237,000
$ 165,000
$ 108,000

$ 225,000
$ 184,000
$ 41,000
$ 10,000
$ 31,000

Current Setting
VolumeError
CostError

SENSITIVITY ANALYSIS (update this section by clicking the "Run Sensitivity Analysis" button to the right)
-------------------------------------------------------(calculates NPV based on potential error in
Best Case
VolumeError Settings:
volume or cost forecasts)
0%
30%
0%
CostError Settings:
0%
0%
5%
RoR
NPV-Best
NPV-Vol
NPV-Co
10%
$ 237,000 $ 37,000 $ 87,000
15%
$ 165,000 $
(7,000) $ 36,000
20%
$ 108,000 $ (41,000) $
(3,000)

Worst Case
30%
5%
NPV-VolCo
$ (68,000)
$ (97,000)
$ (118,000)

NPV

(Volume error = ? ; Cost error=?)

10%
15%
20%

NPV-Best
$237,000
$165,000
$108,000

NPV-Vol
$37,000
$(7,000)
$(41,000)

NPV-Co
$87,000
$36,000
$(3,000)

0%
0%

Potential Error in:

Volume
30%
Cost
5%

Graph Settings
VolumeError
30%
CostError
5%

NPV Calculations

$300,000
$250,000
$200,000
$150,000
$100,000
$50,000
$$(50,000)
$(100,000)
$(150,000)

$
$
$
$
$

NPV-VolCo
$(68,000)
$(97,000)
$(118,000)

Scenarios

192570756.xls.ms_office

12/1/2013

ME217 DFM Cash Flow Analysis

DFM PROFITABILITY ANALYSIS (Cost Savings Project)

Company: Team DFM
Members:
Analysis Date:

Calendar Year
Expected Volumes
Expected Savings per Unit
(describe savings on separate page)

Note: For all input numbers, show a separate sheet describing how you determined these numbers.
2009
2010
2011
2012
2013
2014
2015
TOTAL
---------------------------------------------------------10,000
20,000
30,000
$

40

40

ADDITIONAL FIXED COSTS

(describe costs on separate page)
----------------------------------------------- Product Design
- Machines & Equipment
- Mfg Start-up
- Tools/Molds (inj. molding, casting, etc.)
- Misc 1 ( describe here)
- Misc 2 ( describe here)
- Misc 3 ( describe here)

$
$
$
$
$
$
$

0
------100,000
100,000
100,000
100,000
-

$
$
$
$
$
$
$

1
------20,000
10,000
-

$
$
$
$
$
$
$

2
-------

$
$
$
$
$
$
$

3
-------

$
$
$
$
$
$
$

4
-------

$
$
$
$
$
$
$

5
-------

$
$
$
$
$
$
$

6
-------

$
$
$
$
$
$
$

TOTAL
---------100,000
120,000
100,000
110,000
-

PRODUCT'S Additional FIXED COSTS

400,000

30,000

430,000

$
$
$

2009
--------400,000
400,000
-

$
$
$

2010
--------800,000
30,000
770,000

$
$
$

2011
-------

$
$
$

$
$
$

2013
-------

$
$
$

2014
-------

$
$
$

2015
-------

ANALYSIS
----------------------------------Savings (Savings/unit * Volume)
Fixed Costs
Pretax Savings (Loss)=Savings - Fixed

NET PRESENT VALUE ANALYSIS (PROFITABILITY CALCULATION)

-------------------------------------------------------(assumes accurate Volume & Savings
Rate of Return Required
forecasts)
10%
15%
20%

2012
---------

Net Present Value

$ 636,000
$ 582,000
$ 535,000

Current Setting
VolumeError
SavingsError

SENSITIVITY ANALYSIS (update this section by clicking the "Run Sensitivity Analysis" button to the right)
-------------------------------------------------------(calculates NPV based on potential error in
Best Case
Worst Case
VolumeError Settings:
volume or savings forecasts)
0%
20%
0%
20%
SavingsError Settings:
0%
0%
10%
10%
RoR
NPV-Best
NPV-Vol
NPV-Sav NPV-VolSav
10%
$ 636,000 $ 431,000 $ 534,000 $ 349,000
15%
$ 582,000 $ 392,000 $ 487,000 $ 315,000
20%
$ 535,000 $ 357,000 $ 446,000 $ 286,000

NPV

(Volume error = ? ; Savings error=?)

10%
15%
20%

NPV-Best 0
$636,000 0
$582,000
$535,000

NPV-Vol
$431,0000
$392,000
$357,000

0
NPV-Sav
$534,000
$487,000
$446,000

Potential Error in:

Volume
20%
Savings
10%

Graph Settings
VolumeError
SavingsError

NPV Calculations

$700,000
$600,000
$500,000
$400,000
$300,000
$200,000
$100,000
$-

0%
0%

20%
10%

NPV-VolSav
$349,000
$315,000
$286,000

Scenarios

192570756.xls.ms_office

12/1/2013

ME217 DFM Cash Flow Analysis

DFM PROFITABILITY ANALYSIS (New Product)

Company: Team DFM
Members:
Analysis Date:

End-User Price $
Reseller 2 (if any)
Reseller 1 (if any)
Company Target
Company Target Cost $

Sales
Mark-Up
Price
0%
$
50%
$
18
50%
$
9
5 (or less)
Note: For all input numbers, show a separate sheet describing how you determined these numbers.
2009
2010
2011
2012
2013
2014
2015
TOTAL
---------------------------------------------------------100,000
100,000
100,000
100,000
100,000
100,000
600,000
$
12 $
12 $
12 $
12 $
12 $
12 $
-

18

Calendar Year
Expected Volumes
Company Actual Sales Price
FIXED COSTS
(describe costs on separate page)
----------------------------------------------- Product Design
- Machines & Equipment
- Mfg Start-up
- Tools/Molds (inj. molding, casting, etc.)
- Testing
- Ramp-up costs
- Marketing
PRODUCT'S FIXED COSTS
VARIABLE COSTS / unit
(describe costs on separate page)
----------------------------------------------- Material
- Labor
- Overhead %
Material OH
Labor OH
Total Overhead Cost
- Misc

$
$
$
$
$
$
$

0
------100,000
120,000
50,000
-

1
------$ 100,000
$
$
$ 120,000
$ 50,000
$ 50,000
$ 300,000

2
------$
$
$
$
$
$
$ 100,000

3
------$
$
$
$
$
$
$ 100,000

$
$
$
$
$
$
$

4
-------

$
$
$
$
$
$
$

5
-------

$
$
$
$
$
$
$

6
-------

270,000

$ 620,000

$ 100,000

$ 100,000

$
$

0
------3.00
1.00

$
$

1
------3.00
1.00

$
$

2
------3.00
1.00

$
$

3
------3.00
1.00

$
$

4
------3.00
1.00

$
$

5
------3.00
1.00

$
$

6
-------

$
$

2.00
-

$
$

2.00
-

$
$

2.00
-

$
$

2.00
-

$
$

2.00
-

$
$

2.00
-

$
$

6.00

6.00

6.00

6.00

6.00

6.00

TOTAL
---------200,000
240,000
100,000
50,000
500,000

$ 1,090,000

50%
50%

PRODUCT'S VARIABLE COSTS / unit

ANALYSIS
----------------------------------Unit Contribution Margin (Price - Variable Cost)
Gross Profit Margin
Revenues (Price * Volume)
Total Variable Costs (Volume * Var Cost/unit)
Gross Profit (Rev - Tot Var Costs)
Fixed Costs
Pretax Income (Loss)=Gross Profit-Fixed

2009
2010
2011
2012
2013
2014
2015
------------------------------------------------6.00 $
6.00 $
6.00 $
6.00 $
6.00 $
6.00 $
100%
100%
100%
100%
100%
100%
#DIV/0!

$ 1,200,000
$ 600,000
$ 600,000
$ 270,000
$ 330,000

$ 1,200,000
$ 600,000
$ 600,000
$ 620,000
$ (20,000)

NET PRESENT VALUE ANALYSIS (PROFITABILITY CALCULATION)

-------------------------------------------------------(assumes accurate Volume & Cost
Rate of Return Required
forecasts)
15%
20%
25%

$ 1,200,000
$ 600,000
$ 600,000
$ 100,000
$ 500,000

$ 1,200,000
$ 600,000
$ 600,000
$ 100,000
$ 500,000

$ 1,200,000
$ 600,000
$ 600,000
$
$ 600,000

Net Present Value

$ 1,444,000
$ 1,234,000
$ 1,066,000

$ 1,200,000
$ 600,000
$ 600,000
$
$ 600,000

Worst Case
30%
20%
NPV-VolCo
$ (85,000)
$ (110,000)
$ (126,000)

(Volume error = ? ; Cost error=?)

15%
20%
25%

NPV-Best
$687,000
$569,000
$476,000

NPV-Vol
$233,000
$169,000
$121,000

NPV-Co
$233,000
$169,000
$121,000

0%
0%

Potential Error in:

Volume
30%
Cost
20%

Graph Settings
VolumeError
CostError

NPV Calculations

$800,000
$700,000
$600,000
$500,000
$400,000
$300,000
$200,000
$100,000
$$(100,000)
$(200,000)

$
$
$
$
$

Current Setting
VolumeError
CostError

SENSITIVITY ANALYSIS (update this section by clicking the "Run Sensitivity Analysis" button to the right)
-------------------------------------------------------(calculates NPV based on potential error in
Best Case
VolumeError Settings:
volume or cost forecasts)
0%
30%
0%
CostError Settings:
0%
0%
20%
RoR
NPV-Best
NPV-Vol
NPV-Co
15%
$ 687,000 $ 233,000 $ 233,000
20%
$ 569,000 $ 169,000 $ 169,000
25%
$ 476,000 $ 121,000 $ 121,000

192570756.xls.ms_office

$
$
$
$
$
$
$

30%
20%

NPV-VolCo
$(85,000)
$(110,000)
$(126,000)

12/1/2013