Prepare a capital case reviewers can compare fairly
For sponsors of long-lived asset investments who work with finance, procurement and delivery teams.
The page follows one worked example: Northstar Components, a fictional manufacturer, weighs repairing, replacing or leasing a packaging line. Every figure, date and role is illustrative sample content, not live data.
The decision in the example
Northstar's Plant Operations Manager asks for a decision by 18 June 2026 on Packaging Line 3, a 14-year-old line with rising unplanned downtime. The recommended option is to replace the line for $2.4M. The case is shown as prepared and has not been approved. The sections below give the need, the like-for-like comparison, the dated rationale, the evidence to gather and who owns each part.
Business need
Start with the problem the asset must solve, not the asset you want
Example need statement (fictional): Packaging Line 3 packs about 40% of Northstar's carton volume. Over the last 12 months it stopped without warning for 9% of scheduled hours, up from 6% the year before. Two customer orders shipped late as a result. Customer demand is forecast to grow about 8% a year for the next five years, so the line must be dependable, not just running.
A need statement a reviewer can test does four things:
- Names the process or service affected and the share of work it carries.
- Gives one measured symptom with its period and denominator, such as 9% of scheduled hours over 12 months.
- States the consequence in business terms, such as late orders or lost output.
- States the demand or deadline the investment must meet, such as growth over five years.
Sample baseline for Packaging Line 3
Illustrative Northstar figures, each shown with its period or basis. In a real proposal, use your own measured data and name the source.
Options compared on the same criteria
Fictional estimates over the same five-year window, assuming all options operate throughout it. Undiscounted, with no inflation, tax effects or residual values; Finance determines the full appraisal and accounting treatment.
| Criterion | A. Repair | B. Replace | C. Lease |
|---|---|---|---|
| Upfront cash | $640,000 overhaul | $2,400,000 purchase and install | $150,000 installation |
| Annual running cost (maintenance, energy, scrap) | $410,000 | $230,000 | $230,000 plus $560,000 lease |
| Cash cost over 5 years | $2.69M | $3.55M | $4.10M |
| Expected unplanned downtime (now 9%) | 6% | 2% | 2% |
| Lost output over 5 years ($45K per percentage point per year) | $1.35M | $0.45M | $0.45M |
| 5-year cost including lost output | $4.04M | $4.00M | $4.55M |
| Useful life | 5 more years assumed; validate before the decision | 15 years | 5-year term, then renew or return |
| Cash funding pattern | Smaller capital request | Largest one-time capital request | Periodic lease payments plus installation; Finance determines accounting treatment |
| Key assumption | Overhaul finds no frame damage | Installation fits the planned 3-week shutdown | Lease rate stays fixed for the full term |
| Main tradeoff | Smaller upfront cash; reaches its assumed remaining life at the end of the comparison | Largest upfront cash; assumed useful life extends beyond the comparison | Spreads cash payments, but has the highest modeled five-year cost |
Cost, benefit and dated rationale
Rationale recorded 4 June 2026 (sample). Decision requested by 18 June 2026.
Recommendation: Option B, replace the line. Over five years it costs about the same as repair ($4.00M vs $4.04M) but has ten years of assumed remaining useful life at the end of that window; the repaired line has none under the five-year life assumption. Residual values are not included in these modeled cash costs. Leasing costs about $0.55M more over five years, and the cash it preserves is not needed this year.
What is known
- Downtime of 9% of scheduled hours, from the line's stop log for the last 12 months.
- The $2.4M replacement price, from a supplier quotation valid for 90 days.
- The 14-year age of the line and its 12-year original design life.
What is still an assumption
- The $45K margin per percentage point of downtime. Finance to verify against the last two quarters' actuals before the decision date.
- Downtime of 2% on the new line, taken from the supplier's reference sites. Maintenance Engineering to check against two comparable installations.
- The repaired line lasting the full five-year comparison window. Maintenance Engineering must validate that assumption; an earlier end of life requires an explicit continuation or replacement cost and a rebuilt comparison.
- The 3-week installation window. It depends on the planned shutdown in November 2026.
What would change the recommendation
Replacing saves 4 percentage points of downtime over 5 years (20 point-years) for $0.86M more cash. Under the same five-year operating-life assumption and the stated cost exclusions, a margin below about $43K per percentage point makes repair the lower modeled five-year cost. At $45K the two are nearly level, so this is the number the decision is most sensitive to. Say which number your own case is most sensitive to, so reviewers know where to look first.
This is a prepared case, not an approval. The decision rests with the people or committee your organization's investment governance names.
Evidence to assemble before you submit
Collect these in one folder so a reviewer can trace every figure back to its source. Each card is a checklist, not a link.
- Stop or incident log covering at least 12 months
- Volume or customer impact of the affected process
- Demand forecast with the owner and date it was produced
- Any contractual or regulatory deadline that sets timing
- Written quotations with their validity dates
- Maintenance and energy costs for the last 12 months
- Installation, training and disposal costs per option
- Lease terms, end-of-term conditions and renewal rates
- How each benefit is calculated and by whom
- Margin or savings rate checked by Finance
- Downtime or performance figures from reference sites
- Benefits shown separately from costs, never netted off
- Proposed start date and the shutdown or window it needs
- Named delivery owner and who covers operations meanwhile
- Top three risks with an owner for each
- Date and measure for judging whether the benefit arrived
Delivery and ownership
Name a role for each responsibility before the proposal goes for decision. Role titles are from the fictional example.
Sponsor: Plant Operations Manager
- Writes the need statement and recommendation
- Lists every assumption with an owner and a verify-by date
- Presents the case and answers questions on the decision date
Financial review: Finance business partner
- Confirms the discount rate and hurdle criteria that apply
- Verifies the margin and cost inputs against actuals
- Flags any option that mixes capital and operating costs unfairly
Sourcing advice: Procurement category lead
- Confirms quotations are like-for-like and still valid
- Reviews lease and warranty terms before the decision date
- Advises whether a competitive tender is needed
Delivery owner: Maintenance Engineering Lead
- Fits the work into the planned 3-week shutdown in November 2026
- Names who covers production while the line is out
- Reports against the 2% downtime target 90 days after start-up
Common questions before you start
When do I use this page instead of a routine purchase request?
Use it when the asset will serve the business for years and the real question is how to meet a need: repair, replace, lease or do nothing. Everyday purchases of standard items follow the routine purchase process. Your Finance and Procurement team sets the amount at which a request is treated as capital, so ask your finance business partner before you start.
What if two options come out almost level on cost?
Say so, and name the tiebreaker. In the example, repair and replace differ by $40,000 over five years, so the case turns on useful life and downtime risk. State which of risk, flexibility or funding matters most and why.
How do I treat a figure I cannot verify yet?
Mark it as an assumption, name who will verify it and give a date before the decision. A reviewer can accept a labelled estimate. An unlabelled one weakens every other number on the page.
Does completing this page approve the investment?
No. It prepares a comparable case. Approval follows your organization's investment governance, and the decision date and decision-makers come from Finance and Procurement.