Methodology

Valnomic is deterministic. The same inputs always produce the same outputs, and every output can be traced back to a published formula.

Return on investment (ROI)

ROI = (Total benefit − Total cost) ÷ Total cost

Total cost includes the initial investment plus every recurring cost across the modelled horizon. ROI is undiscounted and therefore ignores the timing of cash flows — always read it alongside NPV.

Net present value (NPV)

NPV = −I₀ + Σ (CFₜ ÷ (1 + r)ᵗ)

Each yearly net cash flow is discounted at your chosen rate r. A positive NPV means the investment creates value above your cost of capital under your assumptions.

Internal rate of return (IRR)

IRR = r where NPV(r) = 0

Solved numerically by bisection between −99.99% and 1000%. When cash flows never change sign, no IRR exists and Valnomic reports 'n/a' rather than guessing.

Payback and discounted payback

First period where cumulative cash flow ≥ 0

Linear interpolation inside the crossing year converts the result to whole months. Discounted payback applies the same logic to discounted cumulative flows.

Sensitivity

ΔNPV for ±20% on each driver

Each driver is varied independently while all others are held at base case, showing which assumption your decision depends on most.

Scenarios

Weighted NPV = 0.25·upside + 0.55·base + 0.20·downside

Upside assumes +25% benefit and −10% cost; downside assumes −30% benefit, +15% cost and three extra months of ramp-up.