This is a simple Lease vs.
Buy case. For this analysis to work the one client is deciding to lease or buy
one property only. If there are more choices, or the possibility of more
choices, use the cost comparison process. In this case the client is going to
use this property for business. The choice is whether to lease or buy the space.
Buying the property requires a down payment and loan payments. Leasing does not
require a down payment, but the amount of the lease payments are greater than
the loan service costs. Should the client use the down payment to buy the
property or should the client use that down payment amount in some other
investment? It is a better
decision to lease and invest the down payment in another investment when the
other investment returns more money than would be saved by buying the property.
If the other investment does not return more money than would be saved, then it
is better to buy the property. Sounds simple! Remember that the assumptions
that lead to any conclusion can change. The advantage that planEASe delivers is
not only ease of use, but the ability to vary the assumptions to make the most
informed decision possible. In this particular sample, the lease calls for all
expenses to be paid for by the tenant. This means the expenses are the same in
either case. This means they are a wash, and need not be included in the
analysis.
produces a report showing (in English) the assumptions used to generate the other reports. It was created with the idea of generating an assumptions report which can be presented to an investor or other concerned party to explain the assumptive basis of the other planEASe reports.
Investment Assumptions 

Price of Property 

$1,000,000.00 
Closing Costs 

2% of Property Price 
Date of Acquisition 

1 January 2010 
Holding Period 

10 Years 
Inflation Rate 

5% per Year 
Sale Price Method 

Continuous Growth at Inflation Rate 
Selling Costs 

6% 



Investor's Assumptions 

General Vacancy & Credit Loss 

Zero 
Tax Rate  First Year 

34% 
Tax Rate  Following Years 

34% 
Capital Gain Rate 

34% 
Cost Recovery Recapture Rate 

34%  Losses Taken Currently 
Present Value Discount Rate Before Debt 

12% per Year 
Present Value Discount Rate Before Tax 

12% per Year 
Present Value Discount Rate After Tax 

12% per Year 



Building Depreciation Assumptions 

Depreciable Amount 

75% of Property Price 
Depreciable Life 

39 Years 
Depreciation Method 

Straight Line 
Depreciation Start Date 

at Acquisition 



New First Loan Assumptions 

Loan Amount 

80% of Property Price 
Loan Interest Rate 

10.5% Annually 
Original Loan Period 

30 Years 
Loan Origination Date 

at Acquisition 
Loan Type 

Monthly Payments, Amortizing 
Loan Points Charged 

1.5 Points, Amortized over Loan Life 



Lease Payment Revenue Assumptions 

Annual Revenue 

$93,000.00 
Revenue Start Date 

at Acquisition 
Revenue Period 

Until Projected Sale 
Revenue Growth Method 

Annual at the Inflation Rate 






details the results of the analysis. Produces the return on savings by purchasing the property (the point of indifference). Both before and after tax returns are shown.

Investment 
Effective 
Operating 
Cash Flow 
Debt 
Cash Flow 
Buy 
(1,020,000) 
0 
0 
(1,020,000) 
788,000 
(232,000) 
2010 
0 
93,000 
0 
93,000 
(87,815) 
5,185 
2011 
0 
97,650 
0 
97,650 
(87,815) 
9,835 
2012 
0 
102,533 
0 
102,533 
(87,815) 
14,717 
2013 
0 
107,659 
0 
107,659 
(87,815) 
19,844 
2014 
0 
113,042 
0 
113,042 
(87,815) 
25,227 
2015 
0 
118,694 
0 
118,694 
(87,815) 
30,879 
2016 
0 
124,629 
0 
124,629 
(87,815) 
36,814 
2017 
0 
130,860 
0 
130,860 
(87,815) 
43,045 
2018 
0 
137,403 
0 
137,403 
(87,815) 
49,588 
2019 
0 
144,274 
0 
144,274 
(87,815) 
56,458 
Sell 
1,531,161 
0 
0 
1,531,161 
(732,978) 
798,184 
Total 
511,161 
1,169,744 
0 
1,680,905 
(823,128) 
857,777 
Rate of Return Before Debt (IRR) 
14.3% 
Rate of Return Before Tax (IRR) 
19.6% 
Net Present Value Before Debt @12% 
141,970 
Net Present Value Before Tax @12% 
168,590 



details the results of the analysis. Produces the return on savings by purchasing the property (the point of indifference). Both before and after tax returns are shown.

Taxable 
Taxable 
Interest 
Depre 
Ordinary 
Buy 
0 
0 
0 
0 
0 
2010 
93,000 
0 
(84,211) 
(18,429) 
(9,640) 
2011 
97,650 
0 
(83,770) 
(19,231) 
(5,350) 
2012 
102,533 
0 
(83,280) 
(19,231) 
22 
2013 
107,659 
0 
(82,736) 
(19,231) 
5,692 
2014 
113,042 
0 
(82,132) 
(19,231) 
11,679 
2015 
118,694 
0 
(81,462) 
(19,231) 
18,002 
2016 
124,629 
0 
(80,717) 
(19,231) 
24,681 
2017 
130,860 
0 
(79,891) 
(19,231) 
31,738 
2018 
137,403 
0 
(78,974) 
(19,231) 
39,199 
2019 
144,274 
0 
(77,955) 
(18,429) 
47,889 
Sell 
0 
0 
(8,000) 
0 
(8,000) 
Total 
1,169,744 
0 
(823,128) 
(190,705) 
155,911 



details the results of the analysis. Produces the return on savings by purchasing the property (the point of indifference). Both before and after tax returns are shown.

Cash Flow 
Ordinary 
Capital 
Taxable 

Cash Flow 
Buy 
(232,000) 
0 
0 
0 
0 
(232,000) 
2010 
5,185 
(9,640) 
0 
(9,640) 
3,278 
8,463 
2011 
9,835 
(5,350) 
0 
(5,350) 
1,819 
11,654 
2012 
14,717 
22 
0 
22 
(7) 
14,710 
2013 
19,844 
5,692 
0 
5,692 
(1,935) 
17,909 
2014 
25,227 
11,679 
0 
11,679 
(3,971) 
21,256 
2015 
30,879 
18,002 
0 
18,002 
(6,121) 
24,759 
2016 
36,814 
24,681 
0 
24,681 
(8,391) 
28,422 
2017 
43,045 
31,738 
0 
31,738 
(10,791) 
32,254 
2018 
49,588 
39,199 
0 
39,199 
(13,328) 
36,261 
2019 
56,458 
47,889 
0 
47,889 
(16,282) 
40,176 
Sell 
798,184 
(8,000) 
701,866 
693,866 
(235,915) 
562,269 
Total 
857,777 
155,911 
701,866 
857,777 
(291,644) 
566,133 
Rate of Return Before Tax (IRR) 
19.6% 
Rate of Return After Tax (IRR) 
15.9% 
Net Present Value Before Tax @12% 
168,590 
Net Present Value After Tax @12% 
71,027 



As you perform an analysis, planEASe measures the worth of the investment in terms of rates of return and net present values. Sensitivity Analysis allows you to investigate how these measures vary with a change in one of the assumptions. Any measure may be chosen for the Sensitivity Analysis, and any assumption may be chosen as well. Sensitivity Analysis provides a one page table and graph which describes the relationship between the assumption value and the resulting measure.
Holding
Period
versus
Rate of Return After Tax
Assumption 
IRR 
1 Year 
0.0% 
2 Years 
4.1% 
3 Years 
9.2% 
4 Years 
11.8% 
5 Years 
13.2% 
6 Years 
14.2% 
7 Years 
14.9% 
8 Years 
15.3% 
9 Years 
15.6% 
10 Years 
15.9% 



As you perform an analysis, planEASe measures the worth of the investment in terms of rates of return and net present values. Sensitivity Analysis allows you to investigate how these measures vary with a change in one of the assumptions. Any measure may be chosen for the Sensitivity Analysis, and any assumption may be chosen as well. Sensitivity Analysis provides a one page table and graph which describes the relationship between the assumption value and the resulting measure.
Property
Value Yearly Growth Rate (%>Inflation)
versus
Rate of Return After Tax
Assumption 
IRR 
At the Inflation Rate 
15.9% 
1% Over Inflation 
17.2% 
2% Over Inflation 
18.5% 
3% Over Inflation 
19.9% 
4% Over Inflation 
21.2% 
5% Over Inflation 
22.4% 
6% Over Inflation 
23.7% 
7% Over Inflation 
24.9% 
8% Over Inflation 
26.1% 
9% Over Inflation 
27.3% 
10% Over Inflation 
28.5% 



As you perform an analysis, planEASe measures the worth of the investment in terms of rates of return and net present values. Sensitivity Analysis allows you to investigate how these measures vary with a change in one of the assumptions. Any measure may be chosen for the Sensitivity Analysis, and any assumption may be chosen as well. Sensitivity Analysis provides a one page table and graph which describes the relationship between the assumption value and the resulting measure.
Price
of Property
versus
Rate of Return After Tax
Assumption 
IRR 
$900,000.00 
18.6% 
$910,000.00 
18.3% 
$920,000.00 
18.0% 
$930,000.00 
17.7% 
$940,000.00 
17.4% 
$950,000.00 
17.2% 
$960,000.00 
16.9% 
$970,000.00 
16.6% 
$980,000.00 
16.4% 
$990,000.00 
16.1% 
$1,000,000.00 
15.9% 


