Overview · What & why
A decision, before a calculation.
An audit checks that the model behaves as intended. Sensitivity asks how its conclusion changes when assumptions move. Neither proves that an assumption is true. Together they help distinguish a calculation error from an uncertain business judgment. Begin with reconciliation and simple edge cases before adding complex scenario narratives.
A concrete example
At $900K NOI, a 6% cap gives $15M value. At 6.5%, value falls to about $13.846M. The $1.154M drop is far larger than a small rounding difference. Pair that cap-rate stress with lower occupancy to test an adverse case.
What to remember
Test both the arithmetic and the decision’s dependence on uncertain inputs.
Before using this in a project: Control totals, an issue log, downside assumptions and the investment decision threshold.