Project Cash Flow and Break-Even Analysis

Project appraisals often go wrong in predictable ways. Profit is confused with cash, working capital and timing are ignored, financing costs are added in the wrong place, and the break-even point is calculated once for a single set of assumptions. Sponsors then approve projects without knowing how sensitive the result is to price, volume, cost or delay, and the first sign of trouble is a funding gap.

This programme follows the logic of a sound project appraisal. It moves through five stages: building project cash flows correctly, understanding cost behaviour and break-even, applying discounting and investment criteria, testing risk through sensitivity and scenarios, and presenting the results so that decision makers can act on them.

Built on recognised practice. The programme references established corporate finance and project appraisal practice, including discounted cash flow methods, cost-volume-profit analysis, the cash flow presentation principles of IAS 7, UNIDO feasibility study guidance and good practice in financial model design. Participants learn how to apply these methods in realistic models, not only to recite formulas.

Decisions this programme improves. Whether a project creates value and how much risk it carries; what minimum price, volume or utilisation is needed to cover costs; how much funding is required and when; which assumptions deserve more work before approval; and how to compare competing projects fairly.

How it is delivered. Twenty hours across five sessions, built around one running case: a capital project, such as a new production line or service facility, for which participants build a cash flow model, calculate break-even and investment measures, run sensitivities and prepare a short investment paper.

In-house option. For organisations, the programme can be tailored to your own appraisal templates, hurdle rates and project types, and delivered to finance, project and business teams together so that proposals are built and reviewed on the same basis.

Who Should Attend

Finance professionals: financial analysts, planning and budgeting staff, and finance business partners

Project professionals: project managers, project controls and PMO staff preparing business cases

Business development and investment staff evaluating new projects and opportunities

Engineers and technical managers who prepare or review capital requests

Public sector officers assessing project proposals and funding requests

Objectives

Distinguish profit from cash flow and identify the relevant cash flows for a project decision

Build a project cash flow forecast including capital expenditure, working capital, tax and terminal value

Classify costs as fixed, variable or semi-variable and calculate contribution margin

Calculate break-even volume, break-even revenue and margin of safety for single and multiple products

Calculate cash break-even and payback, and explain how they differ from accounting break-even

Apply NPV, IRR, discounted payback and profitability index and interpret the results

Select an appropriate discount rate and explain its link to risk and cost of capital

Run sensitivity, scenario and simple simulation analysis to test key assumptions

Estimate peak funding requirements and assess the effect of financing on cash flow

Present a clear investment recommendation with risks and conditions for approval

Course Outline

Cash Is Not Profit: Building Project Cash Flows

Profit, cash flow and why projects fail for lack of cash
Relevant cash flows: incremental, sunk, opportunity and allocated costs
Capital expenditure, phasing and replacement
Working capital: receivables, inventory and payables
Tax, depreciation and terminal value in project cash flows
Presenting cash flows in line with IAS 7 principles

Cost Behaviour and Break-Even Analysis

Fixed, variable and semi-variable costs; operating leverage
Contribution margin and cost-volume-profit analysis
Break-even in units and revenue; margin of safety
Multi-product break-even and sales mix effects
Cash break-even versus accounting break-even
Target profit analysis and pricing decisions

Time Value of Money and Investment Criteria

Discounting and compounding in project appraisal
Net present value and internal rate of return: strengths and pitfalls
Payback, discounted payback and profitability index
Choosing the discount rate: cost of capital and project risk
Nominal and real cash flows; inflation and currency effects
Comparing projects of different size and duration

Testing the Numbers: Risk, Sensitivity and Scenarios

Identifying the value drivers and key assumptions
Sensitivity analysis, tornado charts and break-even on each driver
Scenario analysis: base, downside and upside cases
Introduction to Monte Carlo simulation in spreadsheets
Peak funding, cash flow gaps and the effect of delays and cost overruns
Financing structure and its effect on project and equity cash flows

Modelling Discipline and Presenting the Decision

Financial model design: structure, inputs, calculations and outputs
Error checking, version control and model review
Using data tools and AI assistants in modelling: benefits and checks needed
Writing the investment paper: recommendation, risks and conditions
Post-investment review: comparing actual results with the approved case
Action plan: improving project appraisal in your organisation

Competencies

Project cash flow forecasting

Working capital and funding requirement estimation

Cost behaviour and contribution analysis

Break-even and margin of safety analysis

Discounted cash flow appraisal

Discount rate selection and risk adjustment

Sensitivity and scenario analysis

Financial model design and review

Investment recommendation writing

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