How it works
Write the cash list first. Then decide what the page is measuring.
- Compute NPV at the agreed rate.
- Recompute one or two points above and below.
- See whether the winner holds.
- Show the table, not just the favorite.
Formula in words. If NPV A is lower than NPV B at 7 percent and higher at 9 percent, the rank is rate-fragile.
| Input | Meaning |
|---|---|
| Base rate | The agreed price of waiting |
| Nearby rates | Plus and minus one or two points |
| Cash timing | Where credits and rent sit |
Worked example
Here is a teaching sample. It is not customer data and not a result from a live client.
Lease A start rent$35,000
Lease B start rent$32,550
Discount rate8%
Sample NPV A$294,884
| Metric | Lease A | Lease B |
|---|---|---|
| Start rent | $35,000 | $32,550 |
| Year-1 extras | $7,000 | $7,490 |
| Year-1 credit | $24,000 | $13,200 |
| Sample NPV | $294,884 | $290,086 |
| Year | Rent | Extras | Credit | Cash out | Value today |
|---|---|---|---|---|---|
| Year 1 | $35,000 | $7,000 | $24,000 | $18,000 | $16,667 |
| Year 2 | $36,050 | $7,210 | $0 | $43,260 | $37,088 |
| Year 3 | $37,132 | $7,426 | $0 | $44,558 | $35,372 |
| Year 4 | $38,245 | $7,649 | $0 | $45,894 | $33,733 |
| Year 5 | $39,393 | $7,879 | $0 | $47,272 | $32,173 |
| Year 6 | $40,575 | $8,115 | $0 | $48,690 | $30,683 |
| Year 7 | $41,792 | $8,358 | $0 | $50,150 | $29,262 |
| Year 8 | $43,046 | $8,609 | $0 | $51,655 | $27,908 |
| Year 9 | $44,337 | $8,867 | $0 | $53,204 | $26,615 |
| Year 10 | $45,667 | $9,133 | $0 | $54,800 | $25,383 |
| Sample NPV | — | — | — | — | $294,884 |
How to read the sample
Sample NPV for Rate-flip sample is about $294,884. A second path lands near $290,086. That gap is a talking point, not a promise.
Year notes for Rate-flip sample
- Year 1 of Rate-flip sample has rent of $35,000.
- Shared building cost is $7,000.
- A credit of $24,000 lowers the cash you pay that year.
- Cash out this year is about $18,000. A large credit sits early, so a high rate helps this path.
- Later cash gets a shrink for time. At 8 percent, year 1 is worth about $16,667 today.
- Next, year 2 rent is $36,050.
- CAM, which is a shared building cost, is $7,210.
- There is no credit in this year.
- You pay about $43,260 this year after extras and credits. Year two returns to a plain bill.
- Time shrinks later cash. At 8 percent, year 2 is worth about $37,088 today.
- Then year 3 rent is $37,132.
- Extras for the building come to $7,426.
- Credits skip this year.
- The net cash this year is about $44,558. Later rent is where a low rate helps the other path.
- Waiting has a price. At 8 percent, year 3 is worth about $35,372 today.
- After that, year 4 rent is $38,245.
- The shared building cost this time is $7,649.
- No extra credit shows up this year.
- Cash out this year is about $45,894. The later years grow.
- Later cash gets a shrink for time. At 8 percent, year 4 is worth about $33,733 today.
- In year 5 of Rate-flip sample, rent is $39,393.
- Shared building cost is $7,879.
- There is no credit in this year.
- You pay about $47,272 this year after extras and credits. The last year is the most sensitive to the rate.
- Time shrinks later cash. At 8 percent, year 5 is worth about $32,173 today.
- Year 6 of Rate-flip sample has rent of $40,575.
- CAM, which is a shared building cost, is $8,115.
- Credits skip this year.
- The net cash this year is about $48,690. Keep this later year in the sum for the sample.
- Waiting has a price. At 8 percent, year 6 is worth about $30,683 today.
- Next, year 7 rent is $41,792.
- Extras for the building come to $8,358.
- No extra credit shows up this year.
- Cash out this year is about $50,150. 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 $29,262 today.
- Then year 8 rent is $43,046.
- The shared building cost this time is $8,609.
- There is no credit in this year.
- You pay about $51,655 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 $27,908 today.
- After that, year 9 rent is $44,337.
- Shared building cost is $8,867.
- Credits skip this year.
- The net cash this year is about $53,204. The row still belongs in the sum for the long path.
- Waiting has a price. At 8 percent, year 9 is worth about $26,615 today.
- In year 10 of Rate-flip sample, rent is $45,667.
- CAM, which is a shared building cost, is $9,133.
- No extra credit shows up this year.
- Cash out this year is about $54,800. 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 $25,383 today.
Add those year values. The sample NPV for Rate-flip sample is about $294,884. This is a teaching sample, not a client result.
Trusted sources
These are public references. They are not endorsements and not client results.