Franchise tax (also known as privilege tax) refers to a type of tax paid to some states in order to be chartered or to operate in that state. The details behind franchise taxes vary from state to state and some states even hold companies that are chartered in another state liable for taxes.
Franchise tax is separate from federal and state income taxes. However, they are required to be filed annually in addition to these two other taxes.
Read MoreLIBOR or London Interbank Offered Rate is a benchmark interest rate index used to make adjustments to variable rate loans. It is used as a reference rate for mortgages, construction loans, permanent loans, as well as derivatives, and other financial products. It is usually determined by using LIBOR + a spread based on the borrower’s credit rating or risk profile of the loan.
Read MoreSheet References are when you reference cells or a range of cells in another worksheet. This can be useful in Real Estate, when working with financial models that require multiple references to other worksheets or in everyday use, when you want to keep formulas constant and exact.
Read MoreThe Transpose function in Excel can help save time and effort when reorganizing large sets of data, especially when pulling from databases or other spreadsheets. For instance, if you are pulling financial statements from multiple years, or multiple companies, it can be helpful to use transpose to reorganize the data for different analysis. At Top Shelf Models, we use the Transpose function to manage the reorganization of large data sets.
Read MoreLoan interest expense is a cost that is incurred when borrowing funds. Interest expense is a non-operating expense and is included in the levered cashflow section of a cashflow model. This non-operating expense can be found on the income statements and occasionally balance sheets. The loan interest expense can be paid on a current asset, which occurs as a prepaid interest expense, or on a current liability, which occurs as interest payable.
Read MoreNet Present Value is the present value of a series of cash flows that occur at different times, taking into account the given discount rate for the cash flows. In real estate the NPV is utilized to predict what the future cash flows will be worth at the different discount rates you apply. Simply put, NPV is the difference between the present value of all future cash flows and the amount of cash invested.
Read MoreAt Top Shelf Models, we prefer to use the XIRR function in all of our models. XIRR is a powerful tool that allows ultimate flexibility when calculating IRR. XIRR can provide accurate calculations of both unlevered and levered IRR, as well as Investor IRR. Additionally, XIRR is crucial to accurate waterfall calculations. If you are dealing with anything besides annual distributions, XIRR should be your preferred IRR function. XIRR provides you with a more flexible and accurate calculation, especially if you are working with daily distributions.
Read MoreThe total weighted average of a series of numbers is the average resulting from multiplying each number by a factor that typically represents its importance or frequency. Before calculating a weighted average, you must decide on the values to assign each number. To calculate weighted average, each value is multiplied by its assigned weight which is then summed and divided by the total number of data points.
Read MoreThe Unlevered Cash Flow is a vitally important term to be familiar with in the world of real estate, as it is used as a comparative medium to evaluate the performance of different properties or companies that finance their projects using a variety of different methods. Its parameters are limited enough that investors should take into consideration this metric when making important investing decisions.
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