What to take into your next appraisal
- Show the commitment requested before the supporting metrics.
- Disclose the cashflow and discount convention behind each valuation.
- Give approval conditions owners, evidence and a deadline.
Put the decision and conditions on one page
A committee paper should start with the commitment requested, the preferred option and the conditions that could change it. Link the paper to a frozen model version and dated evidence register. The downloadable example contains the complete fictional cashflow used below; it is a template for reasoning, not an investment recommendation.
Use currency, units, valuation date and return definitions beside every headline. A project NPV cannot be described as the return to an equity partner without adding financing, distribution rules and taxes applicable to that partner.
Sources: UK Government: The AQuA Book
Expose the arithmetic behind the headline
In this fictional unlevered example, pay 4m for land today and 6m at the end of year one. Receive 15m and pay final costs of 2m at the end of year two, giving net receipts of 13m. At an assumed 12% annual discount rate, NPV is -4 - 6 / 1.12 + 13 / 1.12² = approximately 1.01m.
The 3m undiscounted surplus is not the same measure as NPV. Before the final receipt, the project needs 10m of funding. This simplified annual schedule ignores within-year peaks, so a monthly cashflow is required before a real commitment.
| Measure | Illustrative base case |
|---|---|
| Undiscounted surplus | 3.00m |
| NPV at assumed 12% | 1.01m |
| Cash spent before final receipt | 10.00m |
Make the downside change the decision
Delay the 13m net receipt by one year and add 0.5m holding cost at the end of year two. NPV becomes -4 - 6 / 1.12 - 0.5 / 1.12² + 13 / 1.12³ = approximately negative 0.50m. The pre-receipt requirement rises to 10.5m and capital remains committed longer.
This controlled test leaves construction spending unchanged to isolate receipt delay. A real approval delay may also move costs and debt drawdowns. Name which event is delayed and propagate its actual dependencies before presenting the case as a forecast.
Write a conditional recommendation
An example recommendation is: approve the acquisition only after confirming title and planning, validating the sales evidence and securing enough liquidity for the downside case. The committee must explicitly accept, mitigate or reject the negative downside NPV; a positive base case does not resolve it.
Specify who closes each condition and which evidence is required. If the acquisition contract becomes unconditional before those checks can finish, the recommendation should change to defer or renegotiate. The model cannot turn a contractual exposure into a conditional commitment.
Keep the paper reproducible
Attach the dated assumption register, scenario bridge, cashflow, funding terms and review findings. State that this example excludes financing, VAT, transaction taxes and partner distributions. Those omissions are boundaries of the example and must be resolved for a real project.
Archive the committee decision beside the exact model version considered. Record requested amendments and rerun the relevant checks before the revised case is used to draw funds.
Sources: UK Government: The AQuA Book; ICAEW: 20 principles for good spreadsheet practice, 2024 edition
Sources and further reading
- The AQuA Book UK Government
- 20 principles for good spreadsheet practice, 2024 edition ICAEW
Published by Feasly. How we prepare our guides. Suggest a correction.
