Solver to maximize levered IRR

Hi,

I'm an incoming summer associate so feel free to stereotype. I'm working on a project in school right now and I'm running sensitivities for the key inputs. I'm using toggles for all, no data tables. I've found optimal cap structures, etc, but now I am trying to find the optimal year in which to sell an asset to maximize levered IRR. There is a pretty obvious answer, but I'd like to tie it to some other scenarios.

My question is:

  • In solver (which is what I am assuming is the best option here) I am setting the objective of Levered IRR to Max value.

  • The issue is the constraints...in my net sales proceeds line solver is suggesting I sell the asset each year, as you can imagine.

  • How do I constrain it to choosing one year?

The basics of the inputs are:

Net Sales Proceeds is a line item in my CF summary for each year, it reads "0" until year of sale. That drops down to Total CF which is feeding into the Levered IRR output.

Any ideas on how to best approach? I'm just using one example because I would like to run this on other inputs, like when to div recap, etc, but it will hold true for everything since I need to just choose the best year to do it.

 

Not sure if this is exactly what you're looking, but should have the same/similar results. Have a toggle to the side of net sale proceeds that selects what year the exit occurs in. Instead of having 0's in net proceeds, use an if function that populates the exit value if the current year = selected year in toggle or a 0 if false. Run Solver based on the toggle with the constraints being the years in your forecast. You can do the same for dividend recap and whatever else you want.

 

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