Team #7ScenarioReal EstateSubway SandwichesFactors to ConsiderSensitivity Analysis FactorsHouse Sensitivity AnalysisSlide 8Subway Sensitivity AnalysisSlide 10Sensitivity Analysis SummarySummaryResourcesTeam #7Rick Koutzoukis – Organizer, Excel TechieRoel Delos Reyes – Techie, Information GatheringVu Anh Tran – Techie, Information GatheringBrian Hyunwoo Kim - SummarizerScenario26 year old engineer making $62,000 annuallyHas $50,000 to investEither wants to buy a house and rent it out or become a Subway Franchise ownerMARR - 15% Time period – 10 yearsMortgage Loan – 30 year fixed, 5.23%Business Loan – 30 year fixed, 6.75%Real EstatePrice - $400,000Down Payment – $50,000 (12.5%)Monthly Payment - $1,976.75Monthly Income –$2,100Estimated Annual Appreciation – 8%Subway SandwichesPrice - $280,000Down Payment – $50,000 (23.4%)Royalty Fees – 8%Advertising Fees – 4.5%Annual Sales - $600,000Factors to ConsiderCash FlowAppreciationDepreciationTax SavingsPassive or Active InvestmentSensitivity Analysis FactorsHouseMaintenanceFirst Year RentRent IncreaseAppreciation RateSubwayManagers FeeMonthly SalesEquipment CostRent PaymentHouse Sensitivity AnalysisMaintenance Cost Vs. RORy = -9E-05x + 0.21720.00%20.20%20.40%20.60%20.80%21.00%21.20%21.40%21.60%$- $20 $40 $60 $80 $100 $120 $140 $160 $180Monthly Payment ($)R O R (% )House Sensitivity Analysis25.95%Yearly4.00%5.00%6.00%7.00%8.00%9.00%10.00%11.00%Subway Sensitivity AnalysisSubway Sensitivity AnalysisSensitivity Analysis SummaryHouse- By examining equation of graphs we can see that appreciation rate is the biggest factor- All factors did not affect ROR drastically-Always stayed within 10% of the default of 20.78%Subway- Varying the costs (manager fee and rent) made the biggest difference, changing benefits had significantly less effect- ROR varied widely from 0% to 130%SummaryUsing default sensitivity analysis parameters for both scenarios:ROR for house = 20.78%ROR for Subway = 49.22%MARR = 15%ΔROR = 6%ΔROR < MARR, choose lower cost alternativeResourcesInternetDan Kaatz – Real Estate BrokerJohn Koutzoukis – Business OwnerJim Nelson – Subway ownerDr. Rosenkrantz – Financial
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