Worksheet 2: Cash Flow Statement & NPV Calculation

By Project team , on 1 June 2014

Worksheet 2 consolidates information provided by the user into a cash flow statement that runs 15 years into the future. Moreover, the cash flow statement is used to calculate the project’s net present value and projections of the project’s net present value as it progresses to subsequent stages in the development process.


To construct the cash flow statement, the user is asked to provide information in Box 5 about the corporate tax rate at which profits will be charged. The current UK corporate tax rate is 21%. From 2015 onwards, it will be 20%. Although the user can select a lower tax rate, the BRITS tool does not provide an automated option for deducting any tax credits, allowances, and tax relief, companies may be eligible for.

In order to calculate the net present value of the project with the purpose of calculating its net present value, the tool applies two discount rates to the free cash flow (EBIAT):

  • To help the tool determine the first of these discount rates, users are prompted in Box 5 to provide information about the cost of capital of the firm, which is also referred to as the Weighted Average Cost Of Capital (WACC). For entrepreneurial firms that commercialise cell therapy projects, this is typically the rate of return investors in the firm expect to receive. If unknown, we recommend users to use a rate within the range between 20% and 30% with he higher end of the range reserved for earlier stage firms that are considered to be riskier. The rate that discounts the project’s cash flow based on the firm’s cost of capital is applied in row 24 of worksheet 2.


  • The second discount rate that accounts for the project’s R&D risk is automatically applied in row 22. This discount is calculated based on data the BRITS team collected on failure rates of cell therapy projects that are similar to the one characterised by the user in Box 1 of Worksheet 1. These failure rates are also visualised in Figure 1 on Worksheet 1.

The Net Present Value that is presented in Worksheet 2’s cell 28C, is the sum of the discounted cash flows added up to the terminal value of the cash flows after year 15. The terminal value is calculated as the value of an annuity that pays out the firm’s projected free cash flow in year 15, using the firm’s cost of capital.

Also, worksheet 2 generates a figure with the projected project valuations that will be achieved once the project hits subsequent development stages. These projections will be particularly valuable in efforts to plan and assess funding strategies for projects.


Worksheet 3 >>>