Clearly I have something that is not equal to 0 here.

So, I'm going to go back to what we always do, I'm going to go to data and

I'm going to put myself in the cell I want to be 0.

I'm going to go to what if analysis, goal seek,

I'm going to say set that NPV to value 0 by changing cell my guestimate on IRR.

And It tells me that my IRR in monthly time units,

remember we're working with months now, is 1.36%.

Another thing I'd like to show you here is that

I have computed this down here in row 144,

using Excel's IRR function.

I do not recommend using this function or any other complicated

function of Microsoft's for financial quantities.

If you happen to omit a month or a year or something like that,

you'll still get the right number up here, but

this will give you the wrong answer and you won't know why.

And your project won't work out the way you expect it to.

And you'll get lawsuits and you'll be out of business.

And you'll find yourself flipping burgers in McDonald's.

So, that's not good.

So, I always recommend going from first principles to solve for

IRR and other financial quantities in Excel.

Okay so, let's move down to he developer, or

the sponsor, or the equity of this project.

And as we know, the preferred method for evaluating a project for

the sponsor, be it a development project,

cash flow producing property project, doesn't matter, is NPV.

So, what I've got here starting in row 167,

I've got the sponsor's comprehensive cash flows for each month.

That's their net cash flow that we assume happens at the end of each month.

And to compute the NPV, I need to know the sponsor's

opportunity cost of capital in monthly units.

We were given, up above,

that their opportunity cost of capital in annual units was 8%.

So to get to monthly units, I just use the EAIR formula and

I solved that for R given the EAIR for 8%, so

you can see how I've done that, in this cell here, see 170.

And you can also see it in my algebraic version starting in cell D170.

All right, so measuring time in months, cash flow at the end of the month.

Gotta use opportunity cost of capital in months so

I have consistent units everywhere.

And let's go ahead and get the present value of each of the sponsor's cash flows.

So this is going to be, as usual, the cash flow itself

divided by 1 plus the opportunity cost of capital.

And I'll walk that down with a function of 4, or just type in the dollar signs.

If you're using a Mac and I want to to raise that to the amount of time

that's elapsed since T=0, beginning of project, which is 0.

So I get 0 for that, I think this formula is good, I'm not sure,

I'm going to be bold, copy it over to all 12 months and take a look.

All of these are smaller than the numbers up above and

always check the last one pretty carefully,

O167, that's right divided by 1 + c, 170,

that's right raised to the O165 which is 12.

So, that's all looking good and now the NPV is just the sum of all

of these cash flows on their apples to apples discounted to T=0 basis.

So, I'm just going to say down here equal to the sum of the present

value of every stinking cash flow for the sponsor.

And there it is, $56,971.

Also, I did use the Excel IRR formula to

calculate the developer's IRR here.

Again, not recommended for developers.

NPV is always bullet proof for the equity sponsors of any project.

Okay, that's it.

So, I hope that's helped you understand how to compute these quantities that you

see in the spreadsheet in Excel.