ProCash, an Economic Model for Income Properties

Valuation & ROI: for Each Financial Participant

It is logical, and often preferable, to value the positions of each participant separately. Inputs were discussed above for the discount rates to be used for the developer, the lender, and the investor (AVI[115-117]). The cash flow lines to which these rates are applied are reported in format 418.

The default values for all four of these discount rates is 12% (imposed by the default value of AVI[114]). This is judged a reasonably appropriate discount rate for a projection that does not reflect inflation. Higher discount rates should be used for projects with greater risk, or for projections which include the effects of inflation.

Formats 419 and 428 report information useful to present value analysis. Format 419 reports the consequences of using the discount rates as noted above, together with reminders of how the deal was structured. Format 428 reports present values at a wide range of discount rates in order to make it unnecessary to rerun the model to experiment with different discount rates. The user should bear in mind that the total value of the project as reported in format 419 is determined by AVI[112] while the total value as reported in format 428 is simply the sum of the values as distributed to each participant in this project. (Format 419 is the key measures format, also called #6-1 or PRVLUPART).

AVI[115]Developers Opportunity Rate 645  2
AVI[116]Lenders Opportunity Rate 645  2
AVI[117]Investors Opportunity Rate 645  2
ENT[;6]Prtnr Share & Criteria: Investment opportunity rate 645  2
AVI[197]Public Opportunity Rate 645  2

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