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.