How it works
The cash flow is the list of money in and out by year. Write that list first.
- First ask if the space works. Then list the cash. Then discount.
- If two options differ by a door, a dock, or a labor pool, write that beside the NPV.
- If the term is full of options, show cases. Do not force one NPV to hold every path.
- If data is missing, say 'incomplete' instead of inventing a precise rank.
Formula in words. Use NPV only after cash is complete enough that a missing line would not flip the rank by itself.
| Input | Meaning |
|---|---|
| Fit | Can the team work here |
| Cash completeness | Are extras and credits on the page |
| Options | Renewal, exit, and expansion paths |
| NPV | Only after the three rows above |
Worked example
Here is a teaching sample. It is not customer data and not a result from a live client.
Lease A start rent$45,000
Lease B start rent$41,850
Discount rate8%
Sample NPV A$383,389
| Metric | Lease A | Lease B |
|---|---|---|
| Start rent | $45,000 | $41,850 |
| Year-1 extras | $7,000 | $7,490 |
| Year-1 credit | $0 | $0 |
| Sample NPV | $383,389 | $363,950 |
| Year | Rent | Extras | Credit | Cash out | Value today |
|---|---|---|---|---|---|
| Year 1 | $45,000 | $7,000 | $0 | $52,000 | $48,148 |
| Year 2 | $45,900 | $7,210 | $0 | $53,110 | $45,533 |
| Year 3 | $46,818 | $7,426 | $0 | $54,244 | $43,061 |
| Year 4 | $47,754 | $7,649 | $0 | $55,403 | $40,723 |
| Year 5 | $48,709 | $7,879 | $0 | $56,588 | $38,513 |
| Year 6 | $50,170 | $8,115 | $0 | $58,285 | $36,729 |
| Year 7 | $51,675 | $8,358 | $0 | $60,033 | $35,029 |
| Year 8 | $53,225 | $8,609 | $0 | $61,834 | $33,407 |
| Year 9 | $54,822 | $8,867 | $0 | $63,689 | $31,860 |
| Year 10 | $56,467 | $9,133 | $0 | $65,600 | $30,385 |
| Sample NPV | — | — | — | — | $383,389 |
How to read the sample
Sample NPV for the clean-but-wrong site is about $383,389. A second path lands near $363,950. That gap is a talking point, not a promise.
No credit. The site still may lose on fit. If one path wins only because a credit sat in the wrong year, start over.
Year notes for the clean-but-wrong site
- Year 1 of the clean-but-wrong site has rent of $45,000.
- Shared building cost is $7,000.
- No extra credit shows up this year.
- Cash out this year is about $52,000. No credit. The site still may lose on fit.
- Later cash gets a shrink for time. At 8 percent, year 1 is worth about $48,148 today.
- Next, year 2 rent is $45,900.
- CAM, which is a shared building cost, is $7,210.
- There is no credit in this year.
- You pay about $53,110 this year after extras and credits. A smooth step-up does not fix a bad location.
- Time shrinks later cash. At 8 percent, year 2 is worth about $45,533 today.
- Then year 3 rent is $46,818.
- Extras for the building come to $7,426.
- Credits skip this year.
- The net cash this year is about $54,244. Cheap later years cannot buy missing labor.
- Waiting has a price. At 8 percent, year 3 is worth about $43,061 today.
- After that, year 4 rent is $47,754.
- The shared building cost this time is $7,649.
- No extra credit shows up this year.
- Cash out this year is about $55,403. The model looks clean. The operations question remains.
- Later cash gets a shrink for time. At 8 percent, year 4 is worth about $40,723 today.
- In year 5 of the clean-but-wrong site, rent is $48,709.
- Shared building cost is $7,879.
- There is no credit in this year.
- You pay about $56,588 this year after extras and credits. This is the year people forget to talk about risk.
- Time shrinks later cash. At 8 percent, year 5 is worth about $38,513 today.
- Year 6 of the clean-but-wrong site has rent of $50,170.
- CAM, which is a shared building cost, is $8,115.
- Credits skip this year.
- The net cash this year is about $58,285. Keep this later year in the sum for the sample.
- Waiting has a price. At 8 percent, year 6 is worth about $36,729 today.
- Next, year 7 rent is $51,675.
- Extras for the building come to $8,358.
- No extra credit shows up this year.
- Cash out this year is about $60,033. 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 $35,029 today.
- Then year 8 rent is $53,225.
- The shared building cost this time is $8,609.
- There is no credit in this year.
- You pay about $61,834 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 $33,407 today.
- After that, year 9 rent is $54,822.
- Shared building cost is $8,867.
- Credits skip this year.
- The net cash this year is about $63,689. The row still belongs in the sum for the long path.
- Waiting has a price. At 8 percent, year 9 is worth about $31,860 today.
- In year 10 of the clean-but-wrong site, rent is $56,467.
- CAM, which is a shared building cost, is $9,133.
- No extra credit shows up this year.
- Cash out this year is about $65,600. 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 $30,385 today.
Add those year values. The sample NPV for the clean-but-wrong site is about $383,389. This is a teaching sample, not a client result.
Trusted sources
These are public references. They are not endorsements and not client results.