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Maintenance investment and asset-heavy scenarios
Separate capital-budget classifications and compare stabilized project contribution under revenue pressure and construction overruns.
Part 8; Appendix 02 §A2.2; workbook Asset Heavy!D13:D18. Default project amounts are fictional KES millions. Inputs are illustrative assumptions, not live prices or investment recommendations.
Your scenario, step by step.
Fictional teaching case · Illustrative annual period. Currency: KES; money and shares: million. Prices and per-share results use whole currency units per share. Percentage columns show percentages; discount factors are unitless.
Stabilized contribution and simple yield
| Case | Revenue/year | Cash costs/year | Renewal/year | Contribution/year | Project cost | Simple yield (%) |
|---|---|---|---|---|---|---|
| Base | 1,800 | 800 | 150 | 850 | 10,000 | 8.5 |
| Revenue stress | 1,620 | 800 | 150 | 670 | 10,000 | 6.7 |
| Capital overrun | 1,800 | 800 | 150 | 850 | 11,500 | 7.3913 |
| Combined | 1,620 | 800 | 150 | 670 | 11,500 | 5.8261 |
Separate annual capital-budget classification
| Category | Amount |
|---|---|
| Total annual budget | 300 |
| Maintenance/compliance | 150 |
| Expansion | 100 |
| Unclassified — needs evidence | 50 |
Interpret the result.
The annual capital-budget classification is separate from the project screen; the budget is not subtracted again from project contribution.
Simple stabilized yield is not IRR, payback or distributable owner earnings. Construction timing, tax, financing, working capital, leases and occupancy ramp-up are excluded.
Unclassified spending is not automatically growth or maintenance. An issuer-defined recurring-capex label does not resolve economic maintenance.
Formulae and symbol definitions.
Annual contribution = revenue − cash operating costs − renewal. Simple stabilized yield = annual contribution / project capital cost.
Annual contribution = revenue − cash operating costs − renewal. Simple stabilized yield = annual contribution / project capital cost.
Unclassified budget = total annual budget − classified maintenance/compliance − classified expansion.
Unclassified budget = total annual budget − classified maintenance/compliance − classified expansion.
| Symbol | Definition and units |
|---|---|
| \(C\)C | Stabilized annual contribution before financing and tax. |
| \(R,O,M\)R, O, M | Annual project revenue, cash operating costs and renewal investment. |
| \(I\)I | Total project capital cost on the same currency scale. |
| \(y\)y | Simple annual contribution yield, shown as a percentage; not IRR. |
| \(U,B,M_b,G_b\)U, B, Mb, Gb | Unclassified, total, maintenance and expansion amounts in the separate annual budget. |
Read the research and workbook evidence.
Open the companion article →Existing FCFF/WACC valuation explorer · Detailed workbook library
Method background: Berkshire Hathaway’s 1986 owner-earnings discussion. Filings require accounting interpretation; these tools do not fetch SEC or NSE data automatically.