Example Cashflow calculation : Xinaps Support

Let's set up an example:

Consider we have the following Financial properties for building a:

Then the result will be:

Net Present Value = $ 399,000, is a quite positive outcome, so based on the business case of the building, the project may be accepted.
Pay-off time = 26 years, so it is just the the operating period of the building the client owns the building.
Return on Investment = 10%, so there's a great chance the investor gets his money back plus an extra 10% of his investment, compared to doing something else with his money such as saving or buying shares.
Also see the following sheet containing the annual cashflows.

Then the Annual Cashflow chart looks like this:

Consider these scenarios which will come out easy now to communicate with your Asset Manager:

If the construction costs will rise by 25%, so with € 1,000,000, then either the rental fees need increase with $ 1 per SF, the residual value will need to be 3,5 million higher, or the building needs to stand 18 years longer to get at least a positive NPV again.
Increasing the running period by 5 years from 25 to 30 years will increase the Net Present Value by $ 265,000 and will increase the Return on Investment with 7%. That's a 70% increase!
An extra year to design, build and construct the building will increase the pay-off time by 1 year, will decrease the Net Present Value by € 157,000, and will decrease the Return on Investment with 4%.
When you don't account the residual value, you get a slightly negative Net Present Value. The difference is $ 5126,000 less NPV compared to $ 3,000,000 less residual value.
The discount rate has a high effect on the Net Present Value. If your Discount Rate is set to 0%, you calculate with no risk and you get a normal Net Cashflow analysis, which will result in a NPV of $ 8,600,000 instead of $ 399,000. If your Discount Rate is set to 100%, you calculate with high risk, which will result in a NPV of $ - 868,000.

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