The cash flow distribution schedule is commonly referred to as a “pro forma”.  The analysis forecasts income, expenses and expected returns associated with a real estate project. The cash flows are projected for a period of time through study, research, and experience although regardless of the experience and expertise, there is “looking through a crystal ball” projecting events into the future. The analysis is prepared for a variety of purposes but mostly to attract capital (debt and equity) to a specific project.

To illustrate the process of preparing an initial financial analysis for a land development project, Land Development Anywhere USA has been crafted to provide a format and template to provide a tool for valuing the expected cash flows. This article provides a guide with the problem, solution, and formulas to prepare a dynamic analysis for evaluating the risks and returns.

In addition to valuing the expected cash flows, this exercise will provide the opportunity to prepare a clear, organized, and easy to read land development pro forma analysis.  This assignment will require you to organize the information, format text, enter formulas, and calculate the expected returns for this fictional land development project.

The annual cash flows and the resulting metrics can be used as a decision making tool to understand the opportunities and associated risks.  The annual cash flow report is important to understand but understanding the monthly cash flows may reveal additional information as well as opportunities to mitigate risk.

This article provides information regarding the distribution of unlevered and levered monthly cash flows along with instructions to prepare the cash flow worksheets and debt schedule.

When complete, the analysis will allow you to evaluate alternatives by adjusting assumptions.

Preparing a Monthly Project Cash Flow Report for Land Development Anywhere USA