Cash Flow Alternatives


Comparison of Repair and Replacement Alternatives


NOTE: This model example ships with GoldSim software. Either download from this site or open GoldSim and click on the File menu then choose "Open Example..." and it can be found in the Financial Examples directory.

This model uses GoldSim's Scenario Manager to evaluate the cash flow of an aging manufacturing plant that produces widgets that are worth $300 more than the raw materials used to produce it. where the system could be replaced or refurbished. The scneario manager is used to compare the results and manage the scenario input data. Depending on whether the production system is completely replaced or just refurbished, some of the inputs will vary, such as the failure modes of the system, the production capacity, and the capitcal cost to do the work. The current system can be refurbished at a cost of $1 million, but even then, the system will be prone to frequent major failures. Alternatively, the producer can purchase a new system at a cost of $5 million. GoldSim is used to calcuate the cash flow, NPV and IRR of the two alternatives.

This model is intended to introduce you to GoldSim's Cash Flow element, with the use of discrete expenses, a dynamic revenue rate, and the calculation of NPV using an annual discount rate.


Making Better Decisions In An Uncertain World