Switch traffic scenarios, read an NPV-by-traffic table, and justify the decision to open in writing.
Scenarios and the decision threshold
Scenarios and the decision threshold
The model's key assumption is traffic: revenue, tax, and every cash flow depend on it. So the model is switched with a single cell (lesson 6.3): scenario number 1 is the base case (100 orders a day), 2 is the upside (120), 3 is the downside (70). The first year in each is 80% of the level.
Worked example. The “Orders per day (active)” cell picks the level by number: =CHOOSE(number, base, upside, downside). With number 3 that's 70 orders, and 2027 revenue = 70 × 80% × 6 × 360 / 1,000 = 120.96. Every row below references this cell, so one number changes the scenario.
The table below is NPV by traffic level; it's built with a data table (lesson 6.1): the input cell is the order level, the result is NPV. Every 10 orders move NPV by the same ≈ 36.04, and it changes sign between 80 and 90: NPV = 0 at about 86. The base case holds with a margin of about 14 orders a day.
A simplification: if EBIT is negative (in the downside, all 5 years; in the first year, at traffic below ≈ 89 orders), the tax comes out negative. We assume the second location is part of the same legal entity and its loss reduces Zerno's tax: the first location's 2027 EBIT is 44 (lesson 5.3), more than the second location's downside loss (23.33).
This is a learning example, not investment advice.
The second location's NPV by traffic, $ thousands
| Orders per day | NPV | Scenario |
|---|---|---|
| 60 | −94.83 | — |
| 70 | −58.78 | Downside, IRR ≈ −6.4% |
| 80 | −22.74 | — |
| 90 | 13.30 | — |
| 100 | 49.34 | Base, IRR ≈ 29.97% |
| 110 | 85.38 | — |
| 120 | 121.42 | Upside, IRR ≈ 49.6% |
Lesson notes
Scenarios and the decision threshold
The model's key assumption is traffic: revenue, tax, and every cash flow depend on it. So the model is switched with a single cell (lesson 6.3): scenario number 1 is the base case (100 orders a day), 2 is the upside (120), 3 is the downside (70). The first year in each is 80% of the level.
Worked example. The “Orders per day (active)” cell picks the level by number: =CHOOSE(number, base, upside, downside). With number 3 that's 70 orders, and 2027 revenue = 70 × 80% × 6 × 360 / 1,000 = 120.96. Every row below references this cell, so one number changes the scenario.
The table below is NPV by traffic level; it's built with a data table (lesson 6.1): the input cell is the order level, the result is NPV. Every 10 orders move NPV by the same ≈ 36.04, and it changes sign between 80 and 90: NPV = 0 at about 86. The base case holds with a margin of about 14 orders a day.
A simplification: if EBIT is negative (in the downside, all 5 years; in the first year, at traffic below ≈ 89 orders), the tax comes out negative. We assume the second location is part of the same legal entity and its loss reduces Zerno's tax: the first location's 2027 EBIT is 44 (lesson 5.3), more than the second location's downside loss (23.33).
This is a learning example, not investment advice.