Project cash flow calculator

We've developed two tools to help housing providers understand how much energy their buildings use, and the costs savings associated with the projected energy use. The first tool, called Energy benchmarking, lets housing providers see how much energy they use now, set realistic goals for using less energy, and figure out how much money they could save. 

The second tool, the Project cash flow calculator, helps housing providers look at the money side of things. It helps them make smart choices for the long term. These tools work together to help affordable housing providers reach their energy-saving goals and manage financial expectations. This way, they can build strong, lasting communities for the future.   
 

Glossary

1. Net cash flow: Net cash flow is the difference between the total cash inflow and the total cash outflow. In this calculator the inflow corresponds to energy savings and the cash flow corresponds to the project cost and the operating and maintenance (O&M) costs.

2. Cumulative cash flow: Cumulative cash flow means, for any calendar year, the sum of the Annual Cash Flow for each calendar year prior to and including such calendar year.

3. Simple payback: Simple payback is defined as the number of years after which an investment will have paid for itself. In energy efficiency projects it can be translated as the number of years it takes for the energy savings to payback the initial cost of the project. The shorter your payback period is, the faster you will recover your initial investment.    

Payback period = Initial investment / Annual pay

4.  Present value: Present value (PV) is the current value of a future sum of money or stream of cash flows given a specific rate of return.

5. Cumulative present value: Cumulative present value means, for any calendar year, the sum of the Annual Present Value for each calendar year prior to and including such calendar year.

6. Net present value: Net present value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows over a period of time. NPV is the result of calculations that find the current value of a future stream of payments, using the proper discount rate. In general, projects with a positive NPV are worth undertaking while those with a negative NPV are not.

NPV = Cash flow / (1 + i)t – initial investment    
* t = year of project
* i = discount rate    
 

7. Savings to investment ratio: the Savings to investment ratio also called benefit-to-cost ratio is the ratio of the net present value to project costs. Ratios greater than 1 are representative of profitable projects. As for NPV, projects with a positive savings to investment ratio are worth undertaking while those with a negative savings to investment ratio are not.

8. Internal rate of return: Internal rate of return (IRR) follows the same reasoning as Net Present Value. But rather than picking a discount rate to find the current value of a future stream of cashflows, this method relies on an iterative solution to determine what discount rate will cause the NPV of the project to equal zero. IRR is calculated by trial and error by varying the discount rate in the NPV formula until the NPV is equal to 0. The IRR assumes the cash flows from a project are reinvested at the IRR itself.

9. Modified internal rate of return: The Modified internal rate of return (MIRR) follows the same reasoning as IRR but assumes that positive cash flows are reinvested at the firm's cost of capital.