How it works
Write the cash list first. Then decide what the page is measuring.
- Capture start rent, term, extras, and credits.
- Place each item on one timeline.
- Subtract a credit in the year it actually pays.
- Choose one rate and hold it still for both options.
- Divide later cash by one plus the rate, raised to the year number.
- Add the year values and read the gap with care.
Formula in words. NPV = year 1 cash / (1 + rate) + year 2 cash / (1 + rate)^2 + later years in the same way.
| Input | Meaning |
|---|---|
| Start rent | First-year rent before extras |
| Extras | CAM, tax, and insurance the tenant pays |
| Credits | Free rent and build-out money |
| Term | How many years the cash list runs |
| Discount rate | How hard you shrink later cash |
Worked example
Here is a teaching sample. It is not customer data and not a result from a live client.
Lease A start rent$41,000
Lease B start rent$38,130
Discount rate8%
Sample NPV A$356,652
| Metric | Lease A | Lease B |
|---|---|---|
| Start rent | $41,000 | $38,130 |
| Year-1 extras | $8,200 | $8,774 |
| Year-1 credit | $16,000 | $8,800 |
| Sample NPV | $356,652 | $345,983 |
| Year | Rent | Extras | Credit | Cash out | Value today |
|---|---|---|---|---|---|
| Year 1 | $41,000 | $8,200 | $16,000 | $33,200 | $30,741 |
| Year 2 | $42,230 | $8,446 | $0 | $50,676 | $43,447 |
| Year 3 | $43,497 | $8,699 | $0 | $52,196 | $41,435 |
| Year 4 | $44,802 | $8,960 | $0 | $53,762 | $39,517 |
| Year 5 | $46,146 | $9,229 | $0 | $55,375 | $37,687 |
| Year 6 | $47,530 | $9,506 | $0 | $57,036 | $35,942 |
| Year 7 | $48,956 | $9,791 | $0 | $58,747 | $34,278 |
| Year 8 | $50,425 | $10,085 | $0 | $60,510 | $32,692 |
| Year 9 | $51,938 | $10,388 | $0 | $62,326 | $31,179 |
| Year 10 | $53,496 | $10,700 | $0 | $64,196 | $29,735 |
| Sample NPV | — | — | — | — | $356,652 |
How to read the sample
Sample NPV for Calculation sample is about $356,652. A second path lands near $345,983. That gap is a talking point, not a promise.
Year notes for Calculation sample
- Year 1 of Calculation sample has rent of $41,000.
- Shared building cost is $8,200.
- A credit of $16,000 lowers the cash you pay that year.
- Cash out this year is about $33,200. A free-rent credit lands here.
- Later cash gets a shrink for time. At 8 percent, year 1 is worth about $30,741 today.
- Next, year 2 rent is $42,230.
- CAM, which is a shared building cost, is $8,446.
- There is no credit in this year.
- You pay about $50,676 this year after extras and credits. Rent steps up and the credit is gone.
- Time shrinks later cash. At 8 percent, year 2 is worth about $43,447 today.
- Then year 3 rent is $43,497.
- Extras for the building come to $8,699.
- Credits skip this year.
- The net cash this year is about $52,196. The step still compounds.
- Waiting has a price. At 8 percent, year 3 is worth about $41,435 today.
- After that, year 4 rent is $44,802.
- The shared building cost this time is $8,960.
- No extra credit shows up this year.
- Cash out this year is about $53,762. Later cash is smaller in today's dollars.
- Later cash gets a shrink for time. At 8 percent, year 4 is worth about $39,517 today.
- In year 5 of Calculation sample, rent is $46,146.
- Shared building cost is $9,229.
- There is no credit in this year.
- You pay about $55,375 this year after extras and credits. The last year still belongs in the sum.
- Time shrinks later cash. At 8 percent, year 5 is worth about $37,687 today.
- Year 6 of Calculation sample has rent of $47,530.
- CAM, which is a shared building cost, is $9,506.
- Credits skip this year.
- The net cash this year is about $57,036. Keep this later year in the sum for the sample.
- Waiting has a price. At 8 percent, year 6 is worth about $35,942 today.
- Next, year 7 rent is $48,956.
- Extras for the building come to $9,791.
- No extra credit shows up this year.
- Cash out this year is about $58,747. The row still belongs in the sum for the long path.
- Later cash gets a shrink for time. At 8 percent, year 7 is worth about $34,278 today.
- Then year 8 rent is $50,425.
- The shared building cost this time is $10,085.
- There is no credit in this year.
- You pay about $60,510 this year after extras and credits. Keep this later year in the sum for the long path.
- Time shrinks later cash. At 8 percent, year 8 is worth about $32,692 today.
- After that, year 9 rent is $51,938.
- Shared building cost is $10,388.
- Credits skip this year.
- The net cash this year is about $62,326. The row still belongs in the sum for the long path.
- Waiting has a price. At 8 percent, year 9 is worth about $31,179 today.
- In year 10 of Calculation sample, rent is $53,496.
- CAM, which is a shared building cost, is $10,700.
- No extra credit shows up this year.
- Cash out this year is about $64,196. Keep this later year in the sum for the long path.
- Later cash gets a shrink for time. At 8 percent, year 10 is worth about $29,735 today.
Add those year values. The sample NPV for Calculation sample is about $356,652. This is a teaching sample, not a client result.
Trusted sources
These are public references. They are not endorsements and not client results.