Real Estate Appraisal

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Real Estate Appraisal BookFrom Value to WorthSayce S., Smith J., Cooper R. & Venmore-Rowland P.Blackwell Publishing, 2006.

This workbook is intended for teaching purposes only and is designed to compliment the book.

Spreadsheet # 15

Book page # 164

This workbook is intended for teaching purposes only.

www.blackwellpublishing.com

The identification of the key variables using a senstivity analysis with realistic ranges for each variable, in the context of constructing a scenario.

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Sensitivity Analysismoving to:

Scenario Analysis

Sensitivity Analysis in workbooks 13 & 14 showed how to undertake breakeven analysis and the use of two variable data tables.

The investor may wish to see the results using a scenario analysis, looking at say: Optimistic; Pessimistic and Best Estimate outcomes.

For this Excel's Scenario Manager can be used:

Purchase Cost (gross) 2,000,000 Income 135,000 (In Advance)Rental Growth p.a. 4.00%Senior Debt (LTV) 70.00% (Interest Only)Exit Valuation Yield 6.25%Net future Sale Proceeds 2,627,970 Discount (Target) Rate 10.00% Best EstimateExit Costs

Ungeared Cash Flow Mar-06 Mar-07 Mar-08 Mar-09 Mar-10Purchase Cost ###Income 135,000 135,000 135,000 135,000 Net Sale Proceeds 2,627,970 Net Cash Flows ### 135,000 135,000 135,000 2,627,970

IRR = 14.07%NPV = 265,664

Rental Growth and the Exit Valuation Yield have been identifed as key variables.

Go to: Tools: Scenarios and a Scenario has been set up, with the output on the next worksheet.Please note:It is wise to name the cells being usedSet up a descriptor for the Scenario, otherwise your starting point will be lost if you print out your various scenario permutations.

Best Estimate

Page 3

0.04

0.0625

Best Estimate

Optimistic

Page 4

0.05

0.0575

Optimistic

Pessimistic

Page 5

0.02

0.0675

Pessimistic

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Scenario Summary

Best Estimate Optimistic PessimisticChanging Cells:

Rental_Growth 4.00% 5.00% 2.00%Exit_Yield 6.25% 5.75% 6.75%

Result Cells:IRR 14.07% 17.55% 9.66%NPV 265,664 517,366 -21,071

Notes: Current Values column represents values of changing cells attime Scenario Summary Report was created. Changing cells for eachscenario are highlighted in gray.

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Using Comments in Worksheets

Comments can be a very useful addition to a worksheet. They assist in providing detailed or extra information relating to the inputs and formulae in a specific cell.

Comments are used extensively in this re-fp workbook.

This worksheet provides a guide to :

A. Printing CommentsB. Adding a CommentC. Editing a CommentD. Deleting a CommentE. Showing CommentsF. Using the Reviewing Icons

A. To Print Comments

1. Click on the worksheet in question2.3.

a. To print the comments where they appear on the worksheet click:

b.

column headings.4. Click Print

N.B. Print preview can be used before printing to scale the worksheet onto the paper.To use: click Print PreviewClick Set up on the tool barClick Page, and scale the worksheet to the paper.

B. Adding a Comment

1. Click on the cell to which the comment is to be added2.

a.b. Click on the right mouse button

3.4. Add your comment to the text box5. Click on another cell

The comment is now attached to the previous cellThis is shown by the cell having a red triangle in the top right cornerTo view the comment hovver over the cell.

C. Editing a Comment

1. Click on the cell to which the comment has been added2.

a.b. Click on the right mouse button

3.4. Edit the comment in the text box.5. Click on another cell.

D. Deleting a Comment

1. Click on the cell from which the comment is to be deleted.2. Click on the right mouse button3.4. The comment is now deleted

E. Showing Comments

1.2.3. Click on the View tab4. Click on one the the 3 following toggle buttons

a. Noneb. Comment indicator only c. Comment and indicator

F. Using the Reviewing Icons

This places the comment applications as icons in the tool bar.

1.2.3.4. This now gives you the Reviewing icons, which include:

l New Commentl Previous Commentl Next Commentl Show Commentl Show All Commentsl Delete Comment

On the File menu, click Page Setup, then click the Sheet tab.Do one of the following:

As displayed on sheet in the comments box.To print the comments at the end of the worksheet, click At endof sheet in the comments box, and check the box Row and

Do one of the following:Click on Insert on the Tool Bar

Click on Insert Comment

Do one of the following:Click on Insert on the Tool Bar

Click on Edit Comment

Click on Delete Comment

Click on Tools in the tool barClick on Options

Click on View in the tool barClick on ToolbarsClick on Reviewing

This is a comment box

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Authors' Disclaimer:

Disclaimer Clause

This workbook is intended for teaching purposes only.

“The authors are providing this workbook on an ‘as is’ basis and make no representations or warranties of any kind with respect to its contents and disclaim all such representations and

warranties. In addition, the authors make no representations or warranties about the accuracy, completeness, or suitability for any purpose of the information, or any statistical or mathematical

information provided including any formulae pertaining thereto.

The information contained in this workbook may contain technical inaccuracies or typographical errors. All liability of the Authors howsoever arising for any such inaccuracies or errors is

expressly excluded to the fullest extent permitted by law.

The Authors will not be liable for loss or damage arising out of or in connection with the use of this workbook. This is a comprehensive limitation of liability that applies to all damages of any

kind, including (without limitation) compensatory, direct, indirect or consequential damages, loss of data, income or profit, loss of or damage to property and claims of third parties."