When modeling an investment, you compute the present value instead of just forecasting the net cash flows investments, revenues, and expenses, which are separately forecast. There might just be one revenue line for sales, but there might be several expense lines for wages, materials, taxes, and so on. The following is a simplified example with the formulas shown for clarity: Period 0 1 2 3 4 5 6 Revenue 0 101 103 116 139 131 156 Residual 250 Expense 325 66 64 83 85 97 95 Net =B2-B4 =C2-C4 =D2-D4 =E2-E4 =F2-F4 =G2-G4 =H2+H3-H4 PV =B5/$C$8^B1 =C5/$C$8^C1 =D5/$C$8^D1 =E5/$C$8^E1 =F5/$C$8^F1 =G5/$C$8^G1 =H5/$C$8^H1 Rate 0.08 =1+B8 The upper-leftmost cell, which contains "Period," is in cell A1, and the references to $C$8 refer to the cell on the last line containing 1+B8, which works out to 1.08. Suppose that you are wrong about the revenue. By how much does the NPV decrease if you have to lower the revenue by 1%