Customizing the Cash Flow Forecasting Starter Workbook

You can use the cash flow forecast and analysis starter workbook without modification for many cash flow forecasts and analyses. However, you might want to change the workbook so that it more closely matches your requirements. For example, you can add text that describes the asset or investment for which cash flows are forecasted and analyzed. You can increase or decrease the number of periods. For example, you can increase the number of periods to 12 if your periods are months and you want to forecast an entire year. You might also want to remove either the pretax or the after-tax profitability and liquidity measures if you don’t consider one or the other in your decision making.

Note: Before you change anything in the starter workbook other than the forecasting inputs, unprotect the document.

Changing the Number of Forecasting Periods

You can rather easily increase and decrease the number of forecasting periods shown in the cash flow forecast and analysis starter workbook.

• Remove the border from the last column of the cash flow forecast and analysis schedules.
• Copy the current last column of the cash flow forecast and analysis schedules to the right as needed.
• Replace the border on the right of the cash flow forecast and analysis schedules.
• Insert the same number of rows below the Pretax Cash Flow Scenarios matrix in the same way that you added columns to the cash flow forecast and analysis summary.
• Remove the bottom borders of the Pretax Cash Flow Scenarios and After-Tax Cash Flow Scenarios schedules.
• Copy the last row of both the Pretax Cash Flow Scenarios and After-Tax Cash Flow Scenarios into the same number of rows in the same way that you added columns to the cash flow forecast and analysis summary.
• Replace the bottom borders on both the Pretax Cash Flow Scenarios and the After-Tax Cash Flow Scenarios schedules.
• Adjust the pretax and after-tax internal rate of return, adjusted rate of return, and net present value formulas for the new columns so that the cash flow value arguments in the IRR, MIRR, and NPV functions use the correct row of the Pretax Cash Flow Scenarios or After-Tax Cash Flow Scenarios.

To decrease the number of periods, follow these steps:

• Delete any unneeded columns from the right side of the schedule.
• In the Pretax Cash Flow Scenarios and After-Tax Cash Flow Scenarios schedules, delete the rows that correspond to the columns you deleted.

Removing the Pretax Profitability and Liquidity Measures

To remove the pretax profitability and liquidity measures from the spreadsheet, follow these steps:

• Delete the Pretax Cash Flow Scenarios schedule.
• From the Cash Flow Analysis schedule, delete the Pretax IRR, the Pretax Adjusted IRR, the Pretax Net Present Value, the Pretax Cumulative Cash Flows, and the Pretax Payback Period rows.

Removing the After-Tax Profitability and Liquidity Measures

To remove the after-tax profitability and liquidity measures from the spreadsheet, follow these steps:

• Delete the After-Tax Cash Flow Scenarios schedule.
• From the Cash Flow Analysis schedule, delete the After-Tax IRR, the After-Tax Adjusted IRR, the After-Tax Net Present Value, the After-Tax Cumulative Cash Flows, and the After-Tax Payback Period rows.

Combining This Workbook with Other Workbooks

Other workbooks on the companion CD are specifically designed to provide data for the cash flow forecast and analysis starter workbook. In fact, each of the starter workbooks described in the next two chapters provides data that can be used as input for this starter workbook: one of the asset depreciation workbooks can provide the depreciation expenses and the net book value (representing the nontaxable portion of the residual), one of the debt amortization workbooks can provide the interest expense and debt principal payments for each period and the outstanding debt amount, the cost center workbook can be used to construct detailed forecasts of various categories of expenses, and the sales forecasting workbook can be used to develop the sales and cost of sales figures.

Note: For detailed instructions on combining one worksheet with another, refer to Chapter 10.