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Refer back to sheet A1.1 in the Basic Excel Skills Excel file from that module and use the Goal Seek feature to answer the following: 1. Given the original assumptions (the base case), what would the year 1 rent have to be in order to end up with an NPV of $15,000,000? 2. Again, in the base case, rent was assumed to go up 5% per year. If we couldn't raise the initial rent, what would the increase rate for the rent have to be to hit that $15M target NPV? 3. Finally, also starting from the base case, the CEO wants to know how low the operating expense per square foot would have to be in order to reach his goal of a $15M NPV. What would the year 1 operating expense have to be? What insight does that number give you about the chances of cutting operating costs enough to hit that target? Gildeshe following: B27 =NPV(C12,C25G25)-C22 D E F G H Year 2 Year 3 Year 4 Year 5 16.54 Year 1 $80.00 180,000 $15.00 $1.20 30% 85% 12% 12 10% 15.75 1.27 0.26 1.35 0.22 17.36 1.43 0.18 18.23 1.51 0.14 B 1 Office Building 2 3 Parameters Rate of increase 4 Building cost per sq ft 5 Size of building 6 Rent per sq ft 5% 7 Operating expense per sq ft 6% 8 Vacancy rate -4% 9 9 Percent financed 10 Mortgage rate 11 Sale multiple 12 Cost of capital 13 14 15 Cash Flow 16 Gross income 17 Operating expense 18 Net operating income 19 Interest cost 20 Before-tax cash flow 21 22 Down payment (at time 0) 23 Sale price 24 Mortgage cost 25 End of year cash flows 26 27 NPV $11,472,032 28 Title Sheet Terminology Basic Arithmetic Functions Year 1 Year 2 Year 3 Year 4 Year 5 1,890,000 216,000 1,674,000 $1,464,720 $209,280 2,097,900 228,960 1,868,940 $1,464,720 $404,220 2,321,865 242,698 2,079,167 $1,464,720 $614,447 2,562,982 257,259 2,305,722 $1,464,720 $841,002 2,822,406 272,695 2,549,710 $1,464,720 $1,084,990 $2,160,000 $30,596,526 $12,240,000 $19,441,516 $209,280 $404,220 $614,447 $841,002 NPV Function ISPMT Function Office Building Scenario A1.1 A1.2 A1.15 A1.17 A1.18 A1.19 Refer back to sheet A1.1 in the Basic Excel Skills Excel file from that module and use the Goal Seek feature to answer the following: 1. Given the original assumptions (the base case), what would the year 1 rent have to be in order to end up with an NPV of $15,000,000? 2. Again, in the base case, rent was assumed to go up 5% per year. If we couldn't raise the initial rent, what would the increase rate for the rent have to be to hit that $15M target NPV? 3. Finally, also starting from the base case, the CEO wants to know how low the operating expense per square foot would have to be in order to reach his goal of a $15M NPV. What would the year 1 operating expense have to be? What insight does that number give you about the chances of cutting operating costs enough to hit that target? Gildeshe following: B27 =NPV(C12,C25G25)-C22 D E F G H Year 2 Year 3 Year 4 Year 5 16.54 Year 1 $80.00 180,000 $15.00 $1.20 30% 85% 12% 12 10% 15.75 1.27 0.26 1.35 0.22 17.36 1.43 0.18 18.23 1.51 0.14 B 1 Office Building 2 3 Parameters Rate of increase 4 Building cost per sq ft 5 Size of building 6 Rent per sq ft 5% 7 Operating expense per sq ft 6% 8 Vacancy rate -4% 9 9 Percent financed 10 Mortgage rate 11 Sale multiple 12 Cost of capital 13 14 15 Cash Flow 16 Gross income 17 Operating expense 18 Net operating income 19 Interest cost 20 Before-tax cash flow 21 22 Down payment (at time 0) 23 Sale price 24 Mortgage cost 25 End of year cash flows 26 27 NPV $11,472,032 28 Title Sheet Terminology Basic Arithmetic Functions Year 1 Year 2 Year 3 Year 4 Year 5 1,890,000 216,000 1,674,000 $1,464,720 $209,280 2,097,900 228,960 1,868,940 $1,464,720 $404,220 2,321,865 242,698 2,079,167 $1,464,720 $614,447 2,562,982 257,259 2,305,722 $1,464,720 $841,002 2,822,406 272,695 2,549,710 $1,464,720 $1,084,990 $2,160,000 $30,596,526 $12,240,000 $19,441,516 $209,280 $404,220 $614,447 $841,002 NPV Function ISPMT Function Office Building Scenario A1.1 A1.2 A1.15 A1.17 A1.18 A1.19