3.1 Building a 1-sided Sensitivity Table

Creating One-Sided Sensitivity Tables in Excel

• The speaker is demonstrating the creation of a one-sided sensitivity table in Excel to analyze the impact of changing cap rates on investment returns.
• The cap rates being tested are arranged in a column, with the lowest rate at the bottom and the highest at the top.
• The speaker demonstrates how to create a data table in Excel to analyze the impact of varying cap rates on investment returns.
• The speaker explains the process of setting up the row and column input cells for the data table in Excel.
• The speaker highlights the relationship between increasing cap rates and decreasing investment returns, using the example of a 3% decrease in IRR due to a half percent increase in the exit cap rate.
• The speaker emphasizes the importance of understanding the impact of cap rate changes on investment returns, indicating that a 3% change in IRR can translate to a significant difference in dollar terms.
• The speaker discusses the significance of using one decimal place for IRR in financial modeling, emphasizing the broad assumptions made in modeling.
• The speaker demonstrates linking the sensitivity table to other outputs, such as before tax levered NPV, to analyze the impact of cap rate changes on different investment metrics.
• The speaker highlights the process of formatting the sensitivity table and emphasizes the importance of not altering certain areas of the table for clarity.
• The speaker explains the potential financial implications of cap rate changes, indicating that a half percent change in cap rate can lead to substantial gains or losses in investment returns.
• The demonstration provides a comprehensive guide on creating one-sided sensitivity tables in Excel for analyzing the impact of changing assumptions on investment metrics.
• The speaker concludes by emphasizing the importance of understanding the sensitivity of investment metrics to key assumptions, such as cap rates.

Test your knowledge of creating one-sided sensitivity tables in Excel with this quiz. Assess your understanding of setting up input cells, analyzing the impact of cap rate changes on investment returns, and formatting sensitivity tables. Gain valuable insights into the significance of understanding key assumptions in financial modeling.