How it works
The cash flow is the list of money in and out by year. Write that list first.
- Write the base winner.
- Change the discount rate and record the new rank.
- Then change CAM and record again.
- Last, change credit timing. Stop when the next test is theater.
Formula in words. If NPV(A) and NPV(B) change order after one honest input change, report a flip.
| Input | Meaning |
|---|---|
| Base NPVs | The first rank |
| Changed input | One knob |
| New NPVs | The second rank |
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 | $41,500 | $38,595 |
| Year-1 extras | $8,700 | $9,309 |
| Year-1 credit | $11,000 | $6,050 |
| Sample NPV | $368,834 | $356,082 |
| Year | Rent | Extras | Credit | Cash out | Value today |
|---|---|---|---|---|---|
| Year 1 | $41,500 | $8,700 | $11,000 | $39,200 | $36,296 |
| Year 2 | $42,745 | $8,961 | $0 | $51,706 | $44,330 |
| Year 3 | $44,027 | $9,230 | $0 | $53,257 | $42,277 |
| Year 4 | $45,348 | $9,507 | $0 | $54,855 | $40,320 |
| Year 5 | $46,709 | $9,792 | $0 | $56,501 | $38,454 |
| Year 6 | $48,110 | $10,086 | $0 | $58,196 | $36,673 |
| Year 7 | $49,553 | $10,389 | $0 | $59,942 | $34,976 |
| Year 8 | $51,040 | $10,701 | $0 | $61,741 | $33,357 |
| Year 9 | $52,571 | $11,022 | $0 | $63,593 | $31,812 |
| Year 10 | $54,148 | $11,353 | $0 | $65,501 | $30,340 |
| Sample NPV | — | — | — | — | $368,834 |
How to read the sample
Sample NPV for the sensitivity sample is about $368,834. A second path lands near $356,082. That gap is a talking point, not a promise.
Base-case year one. If one path wins only because a credit sat in the wrong year, start over.
Year notes for the sensitivity sample
- Year 1 of the sensitivity sample has rent of $41,500.
- Shared building cost is $8,700.
- A credit of $11,000 lowers the cash you pay that year.
- Cash out this year is about $39,200. Base-case year one.
- Later cash gets a shrink for time. At 8 percent, year 1 is worth about $36,296 today.
- Next, year 2 rent is $42,745.
- CAM, which is a shared building cost, is $8,961.
- There is no credit in this year.
- You pay about $51,706 this year after extras and credits. A CAM test would lift extras here.
- Time shrinks later cash. At 8 percent, year 2 is worth about $44,330 today.
- Then year 3 rent is $44,027.
- Extras for the building come to $9,230.
- Credits skip this year.
- The net cash this year is about $53,257. A rate test would shrink this year more.
- Waiting has a price. At 8 percent, year 3 is worth about $42,277 today.
- After that, year 4 rent is $45,348.
- The shared building cost this time is $9,507.
- No extra credit shows up this year.
- Cash out this year is about $54,855. A start-date test would slide this row.
- Later cash gets a shrink for time. At 8 percent, year 4 is worth about $40,320 today.
- In year 5 of the sensitivity sample, rent is $46,709.
- Shared building cost is $9,792.
- There is no credit in this year.
- You pay about $56,501 this year after extras and credits. Flips often hide in the last years.
- Time shrinks later cash. At 8 percent, year 5 is worth about $38,454 today.
- Year 6 of the sensitivity sample has rent of $48,110.
- CAM, which is a shared building cost, is $10,086.
- Credits skip this year.
- The net cash this year is about $58,196. Keep this later year in the sum for the sample.
- Waiting has a price. At 8 percent, year 6 is worth about $36,673 today.
- Next, year 7 rent is $49,553.
- Extras for the building come to $10,389.
- No extra credit shows up this year.
- Cash out this year is about $59,942. 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 $34,976 today.
- Then year 8 rent is $51,040.
- The shared building cost this time is $10,701.
- There is no credit in this year.
- You pay about $61,741 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 $33,357 today.
- After that, year 9 rent is $52,571.
- Shared building cost is $11,022.
- Credits skip this year.
- The net cash this year is about $63,593. The row still belongs in the sum for the long path.
- Waiting has a price. At 8 percent, year 9 is worth about $31,812 today.
- In year 10 of the sensitivity sample, rent is $54,148.
- CAM, which is a shared building cost, is $11,353.
- No extra credit shows up this year.
- Cash out this year is about $65,501. 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 $30,340 today.
Add those year values. The sample NPV for the sensitivity sample is about $368,834. This is a teaching sample, not a client result.
Trusted sources
These are public references. They are not endorsements and not client results.
How to use this with OccupancyNPV
This page answers the concept. OccupancyNPV applies it inside a DealWorkspace: enter lease scenarios, review cash-flow and occupancy cost, then compare NPV and discount-rate sensitivity. OccupancyNPV NPV is not the same as a face-rent comparison. OccupancyNPV is not a CRM or lease-administration suite, and this page is not legal or investment advice.
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