New Equipment Cost / Benefit Analysis

Description
If your business is planning on expanding operations by way of new equipment purchases, it is important to understand the full scope of financial implications. With this template, you can perform an analysis to understand if the future benefits outweigh the initial costs for various scenarios.


All the assumptions are on a single input tab and the analysis goes for up to a 10 year period with monthly and annual granularity.


User Inputs:
 Analysis Period (up to 120 months)
 Initial Purchase Price
 Installation and Setup Costs
 Financing assumptions (if debt is used) for % financed, term, interest rate
 Expected monthly costs to operate the equipment (5 slots)
 Employee training costs (for up to 3 months from inception and 5 employee slots)
 Estimated monthly savings in labor
 Estimated increase in revenue
 Discount rate (for the DCF Analysis / NPV)


Note, if this is a replacement of obsolete equipment, you may not be getting an increase in revenue, but simply a replacement of the revenue the old piece of equipment was generating. If so, simply enter that number in or whatever number the new equipment can generate in total as you are essentially going from $0.


If this is a replacement of currently functional equipment that is operational, then you want to measure the increase as the main benefit to revenue from your existing machine. You may also need to take into account the fact that the existing equipment may only be functional for a shorter amount of time than the new equipment, so the benefit could vary over time.


If this is purchasing of new equpiment (expansion), then you would simply enter the expected new revenue generated from this new equipment for the 'Estimated increase in revenue' input.


All of these assumptions automatically come together in the form of a monthly pro forma that looks at all potential benefits and associated initial and ongoing costs so that the user can see if the purchase makes sense.


Sensitivity Analysis
Three tables were built to see effect of different purchase prices and estimated monthly benefits. There is a table showing the changing IRRs, Total ROIs, and NPVs as those variable are sensitized.


This template is also included in two bundles:
- All Models Bundle: https://www.eloquens.com/tool/P8Y4TX4v/finance/financial-forecasting-models/financial-models-120-useful-and-usable-logic
- Accounting Tools: https://www.eloquens.com/tool/axKzHNRV/finance/accounting/accounting-bundle-useful-excel-templates-for-accounting-department