Electric-truck investment: should the board approve?
Northline, a fictional manufacturer, is considering a small electric-truck production line. You have incremental project cash flows and a downside scenario. Prepare an investment decision with a numerical hurdle and a clear sensitivity.
Original Finance Circle investment scenario. All figures and the fictional manufacturer are illustrative. McKinsey’s published Talbot Trucks case is related reading; this is not a reproduction or its official solution.
Independent Finance Circle learning material. The source organisation does not sponsor, author or endorse this exercise.
Clarify. Structure. Calculate. Defend.
Take 2 minutes to clarify the decision and definitions, 3 minutes to structure the analysis, then work the exhibits. Finish with a concise recommendation and answer a follow-up. The time is a suggested practice format, not an employer requirement.
Clarify before solving
What are the data basis and reporting boundary?
Original Finance Circle investment scenario. All figures and the fictional manufacturer are illustrative. McKinsey’s published Talbot Trucks case is related reading; this is not a reproduction or its official solution.
Which assumptions can I use without requesting more data?
CAD millions. Initial investment is 40 at time zero, including all capital and initial working capital. Base cash inflow is 12 at each year-end for four years, plus terminal cash of 8 at the end of year 4.
What decision am I expected to support?
Keeping terminal cash at 8, calculate the equal annual operating cash inflow required for zero NPV.
Build your structure
- Incremental cash-flow timing and initial investment
- Discounted base-case value and terminal cash
- Downside NPV and break-even annual cash
- Demand, execution and investment conditions
Use the branches that matter to this decision. A memorised framework is less useful than explaining why each analysis could change your recommendation.
Everything you need to work the case.
Assumptions & boundaries
- CAD millions. Initial investment is 40 at time zero, including all capital and initial working capital.
- Base cash inflow is 12 at each year-end for four years, plus terminal cash of 8 at the end of year 4.
- Discount rate is 10%. Cash flows are already incremental after tax; no separate financing cash flows. Downside annual inflow is 9; terminal cash stays 8.
Project cash flows
| Period | Base cash flow | Downside cash flow |
|---|---|---|
| 0 | −40 | −40 |
| 1 | 12 | 9 |
| 2 | 12 | 9 |
| 3 | 12 | 9 |
| 4 | 20 (12 + 8) | 17 (9 + 8) |
Choose the responsibility. Solve the decision.
Each level uses the exhibits above and asks a different question. Your entries stay in this open page only; copy your work before leaving.
Discount the base case.
Calculate PV of base inflows and project NPV.
Why does the final cash flow equal 20, not 12?
Numerical checks compare your arithmetic with the case model. Written recommendations are self-practice and are not automatically graded.
03 · Reveal worked solution & decision guide
Expected numerical answers
- PV of base inflows
- 43.5025 CAD million
- Base NPV
- 3.5025 CAD million
Work through the calculation
- PV = 12/1.10 + 12/1.10² + 12/1.10³ + 20/1.10⁴.
- Subtract the 40 time-zero investment after discounting the inflows. Carry full precision until final rounding.
A strong concise response
My calculation shows that pv of base inflows is 43.5025 CAD million; base npv is 3.5025 CAD million. Accept under the NPV rule only if the calculated NPV is positive and the cash-flow assumptions are credible.
Answer the interviewer follow-up
Why does the final cash flow equal 20, not 12?
It includes both the year-4 operating inflow of 12 and the separately stated terminal cash of 8 at the same year-end.
Assessment rubric · 20 points
For self-review or mentor discussion. This rubric is not an automated written-answer grade or an employer scoring system.
Correctly derives all 2 numerical results for this level, keeps signs and units consistent, and explains the method.
Explains the objective: Discount the base case. States the supplied scope, timing and metric definitions before calculating.
Accept under the NPV rule only if the calculated NPV is positive and the cash-flow assumptions are credible. Addresses the interviewer follow-up without contradicting the facts.
Leads with a clear conclusion, distinguishes facts from assumptions, and identifies the next evidence needed. Does not claim the source company asked or endorsed this question.
Use full precision until the final rounding. Alternative written recommendations may be reasonable if they respect the facts and explain assumptions. This is Finance Circle’s guide, not an official source-company answer.
Source & attribution
The references below identify the public reporting, hiring guidance, research or mock-interview material used for context. Finance Circle wrote the exercise and its answers. Illustrative figures are explicitly identified; they are not company results or findings.
Public context; Finance Circle’s scenario inputs are illustrative.
Source reviewed 30 October 2026. No external page is needed to answer this exercise. Company names and logos identify sources only. All trademarks belong to their respective owners.