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ProCash, an Economic Model for Income Properties

Shells for Easy Use & for Sensitivity Testing

The user can specify the level of complexity desired for modeling. For example, a very complicated financing structure may make execution of the model slow in repeated experimental tests. If the current focus of experimentation is on sales pace, price, or development costs, the user may wish to skip financing calculations by working in the debt free shell. All financing inputs remain, but sensitivity testing then uses "debt free profit" and "debt free rate of return" as criteria.

ProCash© has four shells, or levels of complexity. Each of these shells uses the same input structure, so that inputs developed in any shell will run on all four.

1. The simplest shell is called a "Pro Forma Financing Setup". It shows total cost and senior financing but does not show ownership structure or return on investment. It is an essential part of each of the other ProCash© shells (referred to as SETUPA).

2. The SETUP model allows for quick and easy experimentation with income, expense, cost, and financing terms in mortgage banker formats. Its output report is called "Pro-Forma Feasibility Setup". It shows cash on cash return for each financial participant.

3. The PROJECTION model provides before-and after-tax cash flow projection for the desired number of years (or other period). This allows evaluation by present value and internal rate of return criteria. It can include any number of depreciation schedules, mortgages, and kickers and has flexibility in reflecting different management incentive structures. The positions of each participant in the project are presented with their respective rates of return on both a pre-tax and after-tax basis if tax rates are entered. Financial management rate of return can be used.

4. The DEVELOPMENT model allows for modeling construction cash flow and construction financing draws. Funds from equity contributions, grants, recovery of deposits, land financing, and other sources can be specified. Construction interest and fees on each credit line are calculated. Equity requirements required by holdbacks, floor-loan levels, and take-out commitments are projected. All the features of the "PROJECTION" model are included in the "DEVELOPMENT" model.

At present, shells three and four are combined into one shell which is called the "Pro-Forma Cash Projection".

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