ComboCurve: Escalations

ComboCurve: Escalations

Escalations

In this article we will discuss the Escalations sub-model in ComboCurve.



Escalation Models allow defined increase or decrease over time in economic variables and are named/numbered as Project or Unique for reference by selection in the other tabs such as:
• CAPEX & other Investments
• Pricing (but not differentials)
• Expenses
Note that “Caps” can be set to override escalation via maximums in the Pricing and Expenses tabs.

Escalation is either be set to increment by % per year or $ per year ($ Escalations are always simple by period though).  The Escalation Frequency can change either Monthly or Yearly increments.  The Compound Method can be either Compound or Simple(Linear).

Example: assuming a % escalation, the four following  models could be created at +10% APY of a $1000 per month expense for 3-years:
• Monthly Simple: $100 is added every year but is applied monthly as $100/12=$8.33 added each month
• Monthly Compound: Each month increases by multiplying the previous by 10%/12 and adding the previous month total.
• Yearly Simple:  Every 12th month increases $100 (12-mo @ $1000, 12 @ $1100, 12 @ $1200)
• Yearly Compound: Every 12th month increases 10% over preceding month (like 12-mo @ $1000, 12 @ $1100, 12 @ $1210)

Flat, Month Period (# months from As Of), or Dates (From-To) may be selected to define the period of escalation.  More complex models are possible to schedule via the plus icon but one scheme (monthly/yearly & simple/compound & %/$) is allowed per model

Note that positive escalation increases (inflates) numbers over time and negative escalation decreases (deflates) numbers over time.   Whether this increases or decreases depends on where it is applied: positive escalation increases NPV for pricing but decreases NPV for expenses for example.

Users can also define a reference date for their escalations so that the escalation will impact all time series steps based on that reference date. From the "Adjust Active Series" dropdown, users can select to "Adjust All From Date." Dates can be referenced from three selections, either:
  1. FPD
  2. As of date, or
  3. Date - which will allow you to hardcode a fixed date for escalations to begin

Tips:

The Escalation Frequency, “constant” is a legacy keyword and should not be used.
The ComboCurve importer does a good job pulling in escalation schemes from Access databases originating in other economics packages.  Ideally, continuation lines are the preferred method of scheduling complex schemes for efficient import.  Note that some escalation schemes are not yet supported in CC such as Expense escalation of all time-series lines from time-0; escalation is only applied on each time-series line as it is in "use" so this differs from other economics packages.  Independently applying disparate escalation schemes to individual time-series lines is also not yet supported.

Note: no escalation is exported to other software packages.  It is imported from those packages however.


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