Calculation Documentation

Model Version v0.2.0 · Last updated 2026-05-15

Read-only reference. Formulas applied identically by the calculation engine and the PDF report.

Units Convention

All financial values are in $000 unless otherwise stated.

Percentages are entered user-friendly (e.g. 21 for 21%) and stored internally as decimals (0.21).

Negative values display in parentheses, e.g. (1,250).

The forecast spans 12 years: Year 0 through Year 11.

Sign Convention

Positive revenue is positive.
Costs and expenses are cash outflows.
Positive change in NWC is a cash use (reduces FCF).
Negative change in NWC is a cash source (increases FCF).
CapEx is entered as a positive number representing cash outflow; the engine subtracts it from FCF.

Core Formulas

Variable names match the workbook glossary (snake_case).

ebitda = total_revenue - total_cogs - total_opex

ebit = ebitda - depreciation

taxable_income = max(0, ebit - nol_carryforward_used)

cash_taxes = taxable_income * tax_rate

net_income = ebit - cash_taxes

operating_cash_flow = net_income + depreciation

free_cash_flow = net_income + depreciation - change_nwc - capex

discount_factor_i = 1 / (1 + discount_rate)^i

npv = sum(discounted_fcf) + discounted_terminal_value

Terminal Value Method

Only the selected method drives the primary NPV.

Gordon Growth

terminal_value = free_cash_flow_year11 * (1 + terminal_growth_rate) / (discount_rate - terminal_growth_rate)

Requires discount_rate > terminal_growth_rate.

Exit Multiple

terminal_value = ebitda_year11 * exit_multiple

Requires exit_multiple > 0.

The selected method appears on the Results dashboard and in the exported PDF. IRR is computed on the FCF stream with the terminal value added to the final period.

Phase 1 Simplifications

Items deliberately kept simple in this release; flag for the CFO.

Discount rate is treated as a single user input (effective WACC). No separate cost-of-equity, cost-of-debt, or capital-structure weighting.
Net working capital uses a simplified % of revenue change (or manual override). The full AR / AP / Inventory days model from the guide is not implemented.
NOL carryforward is applied to shelter future taxable income, but no NOL expiration, IRS §382 limits, or state-specific rules are modeled.
Debt, interest expense, financing raised, and equity dilution are out of scope. The model is unlevered.
Service revenue uses the corrected formula (Q × U × Channels × Price). Service marginal cost is captured in COGS, not netted against revenue.

Validation Checks

Revenue tie-out: sum of revenue streams equals total_revenue.
COGS tie-out: sum of COGS streams equals total_cogs.
FCF formula validation: recomputed FCF matches net_income + depreciation - change_nwc - capex.
Terminal value method validation: a method must be selected; Gordon Growth requires r > g; Exit Multiple must be greater than zero.
OpEx double-counting warning: OpEx is already included in EBITDA / EBIT / Net Income — it must not be subtracted again in FCF.
All annual arrays must contain exactly 12 finite values (no NaN, Infinity, null, or undefined).
Tax rate and discount rate raise warnings when outside typical ranges.

Version History

TBD