How to deal with known probability?

Hi, I am new here as I just got stuck on the following situation!

I am trying to model a cash flow for a real estate acquisition. Part of the scenario is the probability of whether Tenant (x) renews their lease, and Tenant (y) breaks their lease.

In Summary:

Tenant X
Renewing their lease: 50% chance

Tenant Y
Breaking their lease: 10% chance.


Can anyone assist with helping me model this in a cash flow, as the length the rent is being received will change accordingly.

Any help would be greatly appreciated!

Thanks for the quick response.

I don't have a spreadsheet at this stage (trying to build something meaningful).

In simple terms, here is the situation:


Tenant A
Pays $100,000 a Year in Rent
Lease is for 25 Years (Cash Flow for 25 Years)
BUT
Tenant A has an option to exit his lease in Year 10
The chance of him break is, say, 35%.

How can I get excel to model the probability factor in Excel? Could it be by using the RAND feature and an IF statement, or another way?

Originally Posted by oeldere

I'm not interested building a excel up for your question.

You can do it and post it on the forum.

After that I can take a look at it.

So maybe someone else will respond.

Really useful and great start to this forum. The reason I am asking for help is because I don't know how to do this, not because I am lazy.

Maybe I misunderstood what a 'Valued Forum Contributor' means.

Where did I ask for a designed workbook or become rude? I have been polite throughout and explained that it is specifically an issue with dealing with the probability of an outcome based on a percentage.

If that sounds like a request to build a workbook, then apologies, but sounds to me is a simple relationship between taking a variable and its respective probability.

I've solved it;

Probability is inserted as a percentage assumption.

Place a RAND function, then if the % is lower the 0.3, execute the break, if not, continue with cash flow.

Mathematically I'd argue it still needs work and Monte Carlo simulation would be better, but for a basic CF this isn't a bad idea.