How it works
The cash flow is the list of money in and out by year. Write that list first.
- Freeze the cash rules. Move one knob. Record the rank.
- Typical knobs: rate, CAM, commencement, and credit timing.
- Show a small grid. Do not bury it.
- If every test keeps the same winner, say that in one sentence.
Formula in words. Same leases, one changed input, new NPV pair, same story format.
| Input | Meaning |
|---|---|
| Base case | The main ranking |
| Test knobs | Rate, extras, timing |
| Flip note | Whether the winner changed |
Worked example
Here is a teaching sample. It is not customer data and not a result from a live client.
| Metric | Lease A | Lease B |
|---|---|---|
| Start rent | $40,000 | $37,200 |
| Year-1 extras | $9,200 | $9,844 |
| Year-1 credit | $9,000 | $4,950 |
| Sample NPV | $371,535 | $358,419 |
| Year | Rent | Extras | Credit | Cash out | Value today |
|---|---|---|---|---|---|
| Year 1 | $40,000 | $9,200 | $9,000 | $40,200 | $37,222 |
| Year 2 | $41,600 | $9,476 | $0 | $51,076 | $43,789 |
| Year 3 | $43,264 | $9,760 | $0 | $53,024 | $42,092 |
| Year 4 | $44,995 | $10,053 | $0 | $55,048 | $40,462 |
| Year 5 | $46,794 | $10,355 | $0 | $57,149 | $38,895 |
| Year 6 | $48,198 | $10,666 | $0 | $58,864 | $37,094 |
| Year 7 | $49,644 | $10,986 | $0 | $60,630 | $35,377 |
| Year 8 | $51,133 | $11,316 | $0 | $62,449 | $33,739 |
| Year 9 | $52,667 | $11,655 | $0 | $64,322 | $32,177 |
| Year 10 | $54,247 | $12,005 | $0 | $66,252 | $30,687 |
| Sample NPV | — | — | — | — | $371,535 |
How to read the sample
Sample NPV for the base-case lease is about $371,535. A second path lands near $358,419. That gap is a talking point, not a promise.
The base case starts here. If one path wins only because a credit sat in the wrong year, start over.
Year notes for the base-case lease
- Year 1 of the base-case lease has rent of $40,000.
- Shared building cost is $9,200.
- A credit of $9,000 lowers the cash you pay that year.
- Cash out this year is about $40,200. The base case starts here.
- Later cash gets a shrink for time. At 8 percent, year 1 is worth about $37,222 today.
- Next, year 2 rent is $41,600.
- CAM, which is a shared building cost, is $9,476.
- There is no credit in this year.
- You pay about $51,076 this year after extras and credits. A higher rate would shrink these later years more.
- Time shrinks later cash. At 8 percent, year 2 is worth about $43,789 today.
- Then year 3 rent is $43,264.
- Extras for the building come to $9,760.
- Credits skip this year.
- The net cash this year is about $53,024. A CAM surprise would lift this row.
- Waiting has a price. At 8 percent, year 3 is worth about $42,092 today.
- After that, year 4 rent is $44,995.
- The shared building cost this time is $10,053.
- No extra credit shows up this year.
- Cash out this year is about $55,048. A late commencement would slide the whole path.
- Later cash gets a shrink for time. At 8 percent, year 4 is worth about $40,462 today.
- In year 5 of the base-case lease, rent is $46,794.
- Shared building cost is $10,355.
- There is no credit in this year.
- You pay about $57,149 this year after extras and credits. The last year is a common flip zone.
- Time shrinks later cash. At 8 percent, year 5 is worth about $38,895 today.
- Year 6 of the base-case lease has rent of $48,198.
- CAM, which is a shared building cost, is $10,666.
- Credits skip this year.
- The net cash this year is about $58,864. Keep this later year in the sum for the sample.
- Waiting has a price. At 8 percent, year 6 is worth about $37,094 today.
- Next, year 7 rent is $49,644.
- Extras for the building come to $10,986.
- No extra credit shows up this year.
- Cash out this year is about $60,630. 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 $35,377 today.
- Then year 8 rent is $51,133.
- The shared building cost this time is $11,316.
- There is no credit in this year.
- You pay about $62,449 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 $33,739 today.
- After that, year 9 rent is $52,667.
- Shared building cost is $11,655.
- Credits skip this year.
- The net cash this year is about $64,322. The row still belongs in the sum for the long path.
- Waiting has a price. At 8 percent, year 9 is worth about $32,177 today.
- In year 10 of the base-case lease, rent is $54,247.
- CAM, which is a shared building cost, is $12,005.
- No extra credit shows up this year.
- Cash out this year is about $66,252. 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 $30,687 today.
Add those year values. The sample NPV for the base-case lease is about $371,535. This is a teaching sample, not a client result.
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