2.1 What is a Sensitivity Table ✅

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Questions and Answers

What happens to real estate values when cap rates go down?

  • It depends on other factors
  • They remain unchanged
  • They go down
  • They go up (correct)

What happens to the levered IRR of a deal when cap rates go down?

  • It remains unchanged
  • It goes up (correct)
  • It goes down
  • It fluctuates randomly

What does a one-sided sensitivity table test?

  • The impact of changing one assumption on the model's single output
  • The impact of changing one assumption on the model's multiple outputs (correct)
  • The impact of changing two assumptions on the model's single output
  • The impact of changing two assumptions on the model's single output

What does a two-sided sensitivity table test?

<p>The impact of varying two key assumptions in a deal at any given time (B)</p> Signup and view all the answers

What does the gray line in a sensitivity table represent?

<p>Base case assumptions (D)</p> Signup and view all the answers

What is being tested in a one-sided sensitivity table?

<p>One assumption variable on outputs of the model (A)</p> Signup and view all the answers

What is being tested in a two-sided sensitivity table?

<p>The impact of changing two assumptions on the model's single output (D)</p> Signup and view all the answers

Where should sensitivity tables be built in a cash flow model?

<p>On the same page as assumptions (D)</p> Signup and view all the answers

What does the gray line represent in the sensitivity table according to the text?

<p>Base case (D)</p> Signup and view all the answers

Flashcards

Cap rates decrease, what happens to real estate values?

Real estate values increase when cap rates decrease.

Cap rates decrease, how does it impact levered IRR?

A decrease in cap rates leads to a higher levered IRR in a real estate deal.

One-sided sensitivity table tests...

A one-sided sensitivity table tests the effect of changing one assumption on multiple model outputs.

Two-sided sensitivity table tests...

A two-sided sensitivity table tests the effect of varying two assumptions on a single model output at a given time.

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Sensitivity table gray line represents...

The gray line in a sensitivity table represents the base case assumptions.

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One-sided sensitivity table's focus

A one-sided analysis studies a single assumption influencing multiple outputs of a model.

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Two-sided sensitivity table's focus

A two-sided sensitivity table probes the effect of changing two key assumptions simultaneously on one output within a model.

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Best place for sensitivity tables

Sensitivity tables should be positioned with the assumptions in a cash flow model for easy reference.

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Sensitivity table's gray line meaning

The gray line represents the starting point in a sensitivity table, showing the base case assumptions.

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