Download presentation
Presentation is loading. Please wait.
Published byAnn Harre Modified over 3 years ago
1
© JR DeLisle, Ph.D. Introduction to Discounted Cash Flow Analysis by James R. DeLisle, Ph.D. March 18, 2014
2
© JR DeLisle, Ph.D. Lecture Preview The Value Proposition Frontdoor/Backdoor Models DCF Prelude DCF: A Visual Overview One Word: GiNiTiBtAtNR Basic Inputs Introduction to Discounted Cash Flow Schedule 1: Pro Forma Cash Flow Schedules II-III: Depreciation and Loan Amortization Schedules IV-V: Capital Gain Taxes and Net Reversion Schedules VI: Financial Ratios DCF Schedules
3
DCF PRELUDE: FRONTDOOR/BACKDOOR
4
© JR DeLisle, Ph.D. The Value Proposition: Value => Cost? Land & Hard Costs Unknown Fees Known Soft Costs & Fee Costs TRCm Value = Income Rate $’s Cost = Create Value Value ?? TRCm = Total Replacement Cost market
5
© JR DeLisle, Ph.D. FD/BD Value Proposition: Cost Value ? Value * Rate = Income Value * Rate Income Frontdoor Value * Rate => Income Value <= Income Rate Backdoor User
6
© JR DeLisle, Ph.D. Frontdoor Model: Sequence Land Hard & Soft Costs TRCm NIr * Wcc / NIR GIr NIR = 1 – (Er + Ptx + Vr)
7
© JR DeLisle, Ph.D. Backdoor Model: Reverse Engineered Land Hard & Soft Costs TRCj NIm / Wcc / NIR GIm NIR = 1 – (Er + Ptx + Vr)
8
© JR DeLisle, Ph.D. Backdoor to Unleveraged DCF Analysis Land Hard & Soft Costs TRCm NIm / Wcc * NIR GIm Market
9
Frontdoor/Backdoor vs. DCF Frontdoor/Backdoor Annuitized Leveraged/Unleveraged Constant Dollars – Before Tax – Before Sale Discounted Cash Flow Non-annuitized Leveraged/Unleveraged Present Value (TVM) – After-tax – After Sale
10
DCF MODELS: A VISUAL PERSPECTIVE
11
© JR DeLisle, Ph.D. Equity Justified: PV of CF + PV Net Reversion NIr GIr PV CF +
12
© JR DeLisle, Ph.D. Net Reversion TRCm NIr GIr Stabilized NOI Sales Price - Sales Exp Net Reversion Appreciation Land Value Depreciation Amortization Mortgage CG Appr x 15% CG Depr x 25% Pb Net Sales Price
13
© JR DeLisle, Ph.D. Equity Justified: PV of CF + PV Net Reversion = Ej NIr GIr Sales Price - Sales Exp - Tax on Sale - Mtg. Bal. Net Reversion PV CF + PV NR
14
© JR DeLisle, Ph.D. Cash Flow: The One Key Word GINITIBTATNR Gross Income Net Income Taxable Income Before Tax Cash Flow After Tax Cash Flow Net Reversion
15
DCF CASE STUDY: INPUTS AND SCHEDULES
16
© JR DeLisle, Ph. D. Real Estate Fundamentals © JR DeLisle, Ph. D. Cash Flow Variables and TRC/FD/BD Inputs Selling Expense Exit Cap Rate DeprLife39 CGTxR15.00% CGTxV25.00%
17
© JR DeLisle, Ph.D. Discounted Cash Flow and Financial Ratios Schedule I: Cash Flow Schedule II: Depreciation Schedule III: Loan Amortization Schedule IV: Net Reversion Schedule V: Capital Gain Tax Schedule VI: Financial Ratios
18
© JR DeLisle, Ph.D. Schedule I: Cash Flow Overview
19
© JR DeLisle, Ph.D. Schedule I: Cash Flow Overview
20
© JR DeLisle, Ph.D. Schedule I: GI to NI
21
© JR DeLisle, Ph.D. Schedule II: Depreciation $3,436,567*(1/39) = $88,117
22
© JR DeLisle, Ph.D. Schedule III: Loan Amortization Calculate Payment Calc. Principal Balance Calc. Prin. Reduction Calc. Interest
23
© JR DeLisle, Ph.D. Schedule III(b): Loan Amortization
24
© JR DeLisle, Ph.D. DCF: NI to BTCF
25
© JR DeLisle, Ph. D. Real Estate Fundamentals © JR DeLisle, Ph. D. Schedule I: BTCF to ATCF If TI > 0, -TI * MtxR If TI < 0, TI * MtxR
26
© JR DeLisle, Ph.D. Schedule IV-V: CGTaxes on Sale & AT Proceeds Schedule IV: AT Proceeds Schedule V: Capital Gain Tax On Sale If, CapGain * 15% AccDepr * 25%
27
© JR DeLisle, Ph.D. Schedule I: Cash Flow 1- 10
28
INTRODUCTION TO DCF RATIOS: KEY FINANCIAL INDICATORS
29
© JR DeLisle, Ph.D. Schedule VI: Financial Ratios
30
© JR DeLisle, Ph.D. Schedule VI: Financial Ratios
31
© JR DeLisle, Ph. D. Real Estate Fundamentals © JR DeLisle, Ph. D. Debt Coverage Ratio Interpretation – DCR provides a measure of the safety of the mortgage position, indicates the cushion between required payments and NOI. – DCR’s should normally be 1.2 or more Equation DCR: 1.3 Target
32
© JR DeLisle, Ph.D. Lecture Review The Value Proposition Frontdoor/Backdoor Models DCF Prelude DCF: A Visual Overview One Word: GiNiTiBtAtNR Basic Inputs Introduction to Discounted Cash Flow Schedule 1: Pro Forma Cash Flow Schedules II-III: Depreciation and Loan Amortization Schedules IV-V: Capital Gain Taxes and Net Reversion Schedules VI: Financial Ratios DCF Schedules
Similar presentations
© 2018 SlidePlayer.com Inc.
All rights reserved.
Ppt on dry cell and wet cellulose Ppt on resistance temperature detector rtd Ppt on non agricultural activities youtube Ppt on anti cancer therapy journal Ppt on asian development bank Ppt on isobars and isotopes of uranium Ppt on 3d figures Ppt on group development activities Ppt on area of parallelogram formula Strategic management ppt on nestle